CREWS: a CAMELS-based early warning system of systemic risk in the banking sector

Jorge Galan

No 2132, Occasional Papers from Banco de España

Abstract: This document proposes an aggregate early-warning indicator of systemic risk in the banking sector. The indicator is derived from a logistic model based on the variables in the CAMELS rating system, originally developed for the US, and complemented with macroeconomic aggregate variables. The model is applied to the Spanish banking sector using bank-level data for a complete financial cycle, from 1999 to 2021. The performance of the model is assessed not only during the last global financial crisis and the subsequent sovereign crisis, but also during the recent Covid-19 shock. The proposed indicator has a macroprudential orientation, which differs from most of previous studies predicting individual bank defaults. The indicator is found to provide accurate early-warning signals of systemic risk in the banking sector within a two-year horizon. In this context, the indicator provides mid-term signals of systemic risk that complement those derived from macrofinancial indicators and from measures of the materialization of risk.

Keywords: banks; defaults; early-warning performance; macroprudential policy; systemic risk (search for similar items in EconPapers)
JEL-codes: C25 E32 E58 G01 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg, nep-mac, nep-mon and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 21/Files/do2132e.pdf First version, November 2021 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2132

Access Statistics for this paper

More papers in Occasional Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().