The determinants of UK credit union failure
Jamie Coen (),
William Francis () and
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Jamie Coen: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
No 658, Bank of England working papers from Bank of England
This paper examines the determinants of credit union failure in the United Kingdom. Using regulatory data on credit unions, we estimate several discrete-time logit models and evaluate their predictive ability at one, two and three-year time horizons. We find that a small set of financial attributes related to capital adequacy, asset quality, earnings performance and liquidity is useful for early identification of troubled credit unions. Both in and out-of-sample results indicate that this parsimonious set of firm-level characteristics, augmented with national and regional unemployment rates, reliably identifies failures while keeping false alarm rates at modest levels. The results provide support for establishing early-warning criteria for supervisory use in monitoring credit unions.
Keywords: Credit unions; failure; early warning; logit; policymaker loss function (search for similar items in EconPapers)
JEL-codes: G21 G28 G38 (search for similar items in EconPapers)
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