How well do aggregate prudential ratios identify banking system problems?

Martin Cihak () and Klaus Schaeck

Journal of Financial Stability, 2010, vol. 6, issue 3, 130-144

Abstract: Aggregate prudential ratios have become a mainstay of financial stability analysis. But how reliable are these indicators when it comes to distinguishing between strong and weak banking systems? We address this issue by analyzing the performance of aggregate prudential ratios in systemic banking crises, drawing upon a large cross-country dataset. We caution against sole reliance on these indicators, and advocate supplementing them with other tools and techniques. Nonetheless, our findings offer evidence that some of the ratios can help identify systemic banking problems.

Keywords: Financial; soundness; indicators; Banking; crises; Macroprudential; analysis (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:6:y:2010:i:3:p:130-144

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