Bank regulation, property prices and early warning systems for banking crises in OECD countries

Iana Liadze (), Ray Barrell and E Davis ()

No 330, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: Early warning systems (EWS) for banking crises generally omit bank capital, bank liquidity and property prices. Most work on EWS has been for global samples dominated by emerging market crises where time series data on bank capital adequacy and property prices are typically absent. We estimate logit crisis models for OECD countries, finding strong effects from capital adequacy and liquidity ratios as well as property prices, and can exclude traditional variables. Higher capital adequacy and liquidity ratios have a marked effect on the crisis probabilities, implying long run benefits to offset some of the costs that such regulations may impose.

Date: 2009-03
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Journal Article: Bank regulation, property prices and early warning systems for banking crises in OECD countries (2010)
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