Predicting bank insolvency in the Middle East and North Africa

Pietro Calice

No 6969, Policy Research Working Paper Series from The World Bank

Abstract: This paper uses a panel of annual observations for 198 banks in 19 Middle East and North Africa countries over 2001-12 to develop an early warning system for forecasting bank insolvency based on a multivariate logistic regression framework. The results show that the traditional CAMEL indicators are significant predictors of bank insolvency in the region. The predictive power of the model, both in-sample and out-of-sample, is reasonably good, as measured by the receiver operating characteristic curve. The findings of the paper suggest that banking supervision in the Middle East and North Africa could be strengthened by introducing a fundamentals-based, off-site monitoring system to assess the soundness of financial institutions.

Keywords: Banks&Banking Reform; Bankruptcy and Resolution of Financial Distress; Access to Finance; Financial Crisis Management&Restructuring; Debt Markets (search for similar items in EconPapers)
Date: 2014-07-01
New Economics Papers: this item is included in nep-ara, nep-cba and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:6969

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