Distress in European Banks: An Analysis Basedon a New Dataset
Author:
Mr. Tigran Poghosyan
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Mr. Martin Cihak
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https://orcid.org/0000-0002-3571-9707
The global financial crisis has highlighted the importance of early identification of weak banks: when problems are identified late, solutions are much more costly. Until recently, Europe has seen only a small number of outright bank failures, which made the estimation of early warning models for bank supervision very difficult. This paper presents a unique database of individual bank distress across the European Union from mid-1990s to 2008. Using this data set, we analyze the causes of banking distress in Europe. We identify a set of indicators and thresholds that can help to distinguish sound banks from those vulnerable to financial distress.
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