banking crises

Regulatory failure and regulatory change in the banking sector

"In this short note I make some simple points about what went wrong with regulation of financial institutions before the financial disasters of 2007–8 and what has happened – and what should have happened – since. The problems were largely with banks and so most of what I will say is about them. I will make some general points, but at times I will say things that are somewhat more specific to the UK."

Evaluating off-balance sheet exposures in banking crisis determination models

Given the evident effect that banks' off-balance sheet activity has had on systemic vulnerability in the sub-prime crisis, we test for a consistent impact of off-balance sheet exposures on the probability of banking crises in OECD countries since 1980. Variables capturing off-balance sheet activity have been neglected in most early warning models to date, mainly due to the lack of the data.

The impact of global imbalances: Does the current account balance help to predict banking crises in OECD countries?

Given the magnitude of 'global imbalances' in the run-up to the subprime crisis, we test for an impact of the current account balance on the probability of banking crises in OECD countries since 1980. This variable has been neglected in most early warning models to date, despite its prominence in theory and in case studies of crises.

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

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.