Predicting Bank Insolvency in the Middle East and North Africa

This paper uses a panel of annual observations for 198 banks in 19 Middle East and North Africa countries over 2001-12 to develop an early warning system for forecasting bank insolvency based on a multivariate logistic regression framework. The results show that the traditional CAMEL indicators are significant predictors of bank insolvency in the region. The predictive power of the model, both in-sample and out-of-sample, is reasonably good, as measured by the receiver operating characteristic curve. The findings of the paper suggest that banking supervision in the Middle East and North Africa could be strengthened by introducing a fundamentals-based, off-site monitoring system to assess the soundness of financial institutions.

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Bibliographic Details
Main Author: Calice, Pietro
Format: Policy Research Working Paper biblioteca
Language:English
en_US
Published: World Bank Group, Washington, DC 2014-07
Subjects:ACCOUNTABILITY, ACCOUNTING, ASSET PORTFOLIO, ASSET RATIO, ASSETS RATIO, BALANCE OF PAYMENTS, BALANCE SHEET, BALANCE SHEETS, BALANCE-SHEET, BALANCE-SHEET INSOLVENCY, BANK ASSET, BANK ASSET QUALITY, BANK CAPITALIZATION, BANK EARNINGS, BANK FAILURE, BANK FAILURES, BANK FOR INTERNATIONAL SETTLEMENTS, BANK HOLDING, BANK HOLDING COMPANIES, BANK INSOLVENCY, BANK LIQUIDITY, BANK MANAGEMENT, BANK OF ENGLAND, BANK PROFITS, BANK REGULATION, BANK RISK, BANK RUN, BANK SUPERVISION, BANKING ASSETS, BANKING CRISES, BANKING MARKET, BANKING MARKETS, BANKING SECTOR, BANKING SUPERVISION, BANKING SYSTEM, BANKING SYSTEM DISTRESS, BANKING SYSTEMS, BANKRUPTCY, BANKS, BUSINESS CYCLE, CAPITAL ADEQUACY, CAPITAL BASE, CAR, CERTIFICATES OF DEPOSITS, CHECKS, COMMERCIAL BANK, COMMERCIAL BANKS, CONSOLIDATION, CONTAGION, COOPERATIVE BANKS, CORPORATE GOVERNANCE, CORRUPTION, CREDIT DEFAULT, CREDIT DEFAULT SWAPS, CREDIT RISK, DEBT, DEFAULT RISK, DEFAULTS, DEPENDENT, DEPOSIT, DEPOSIT INSURANCE, DEPOSITORS, DEPOSITS, DEREGULATION, DEVELOPING COUNTRIES, DIVERSIFICATION, DOMESTIC CURRENCY, DUMMY VARIABLE, EARLY WARNING SYSTEM, EARLY WARNING SYSTEMS, EARNING ASSETS, ECONOMIC POLICY, EQUALITY, EQUITY CAPITAL, EQUITY RATIO, ESTATE, EUROPEAN CENTRAL BANK, EXCHANGE RATE, FEDERAL RESERVE, FEDERAL RESERVE BANK, FEDERAL RESERVE BANK OF NEW YORK, FINANCIAL ACCESS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEEPENING, FINANCIAL DEVELOPMENT, FINANCIAL INDICATORS, FINANCIAL INFORMATION, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIATION, FINANCIAL POLICY, FINANCIAL REPORTING, FINANCIAL RISK, FINANCIAL SECTOR REGULATION, FINANCIAL SERVICES, FINANCIAL STABILITY, FINANCIAL SYSTEMS, GOVERNANCE STRUCTURES, GOVERNMENT OWNERSHIP, INCOME STATEMENTS, INDIVIDUAL BANK, INDIVIDUAL BANKS, INFLATION, INSOLVENCIES, INSOLVENCY EPISODES, INSOLVENCY RISK, INSOLVENT, INSOLVENT BANKS, INSTITUTIONAL ENVIRONMENT, INTEREST INCOME, INTEREST RATES, INTERNATIONAL BANK, ISLAMIC BANKS, LARGE BANKS, LEVERAGE, LIABILITY, LIABILITY SIDE, LIQUID ASSETS, LIQUIDATION, LIQUIDITY POSITION, LIQUIDITY PROBLEMS, LIQUIDITY RATIOS, LIQUIDITY RISK, LOAN, LOAN CLASSIFICATION, LOAN LOSS, LOAN LOSS PROVISIONING, LOAN LOSS PROVISIONS, LOAN PORTFOLIO, MACROECONOMIC ENVIRONMENT, MACROECONOMIC VARIABLES, MARKET CONCENTRATION, MARKET DISCIPLINE, MARKET PARTICIPANTS, MARKET SHARE, MARKET STRUCTURE, MONETARY FUND, MORTGAGE, MORTGAGE BANKS, NEGATIVE SHOCKS, NONPERFORMING LOANS, NPL, OPERATING COSTS, OPERATIONAL RISK, OWNERSHIP STRUCTURE, PENDING INSOLVENCY, POLITICAL STABILITY, PREDICTIONS, PRIVATE BANKS, PROBABILITY OF INSOLVENCY, PROFITABILITY, PRUDENTIAL REQUIREMENTS, PUBLIC DISCLOSURE, RATING SYSTEM, REAL ESTATE, RECAPITALIZATION, RECEIVER, RECEIVERSHIP, REGULATORY FRAMEWORK, RESERVE BANK, RESERVES, RETURN, RETURN ON ASSETS, RISK EXPOSURES, RISK OF INSOLVENCY, RISK TAKING, RULE OF LAW, SAVINGS, SAVINGS BANKS, SENSITIVITY ANALYSIS, SEPARATION OF OWNERSHIP, SHAREHOLDERS, SMALL BANKS, SOLVENCY PROBLEMS, SOLVENT INSTITUTIONS, STOCK EXCHANGES, STOCK MARKET, SYSTEMIC BANKING DISTRESS, SYSTEMIC RISK, TRANSITION ECONOMIES, UNION, VULNERABILITY, WHOLESALE BANK,
Online Access:http://documents.worldbank.org/curated/en/2014/07/19875103/predicting-bank-insolvency-middle-east-north-africa
http://hdl.handle.net/10986/19356
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