Characteristics of Banking Crises

Abstract

This paper compares determinants of banking sector crises using an early warning system approach in a diverse cross-country panel. We cover 152 countries using annual data from 1990 to 2011. We provide three main contributions: (i) accommodating different influences on banking sector fragility (banking sector, macroeconomic and structural features) in a wide country panel; (ii) introducing a variable accounting for geographical contagion effects; and (iii) cross country comparison based on two subsamples: advanced and developing countries. We find systematic differences between country groups and evidence for the influence of geographical contagion effects. The specification produces reliable early warning signals to detect crisis events on the banking sector level.

The Impact of Industry Concentration on Stability: The Case of Indonesian Islamic-Commercial Banks

“…However, the influence was statistically insignificant in the two models. From the negative sign of that variable, those findings contradict Fendel and Stremmel (2016), who found that financial deepening lowers the likelihood of a banking crisis. However, when the financial deepening is measured by the ratio of domestic credit to GDP, whereas the domestic credit is also part of M2, an increase in that ratio will raise the possibility of a banking crisis, as also suggested by Gupta and Kashiramka (2020).…”