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 res...

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Main Author:	Calice, Pietro
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
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

id	okr-10986-19356
recordtype	oai_dc
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	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
spellingShingle	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 Calice, Pietro Predicting Bank Insolvency in the Middle East and North Africa
geographic_facet	Middle East and North Africa North Africa Middle East
relation	Policy Research Working Paper;No. 6969
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Calice, Pietro
author_facet	Calice, Pietro
author_sort	Calice, Pietro
title	Predicting Bank Insolvency in the Middle East and North Africa
title_short	Predicting Bank Insolvency in the Middle East and North Africa
title_full	Predicting Bank Insolvency in the Middle East and North Africa
title_fullStr	Predicting Bank Insolvency in the Middle East and North Africa
title_full_unstemmed	Predicting Bank Insolvency in the Middle East and North Africa
title_sort	predicting bank insolvency in the middle east and north africa
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/07/19875103/predicting-bank-insolvency-middle-east-north-africa http://hdl.handle.net/10986/19356
_version_	1764443699253608448
spelling	okr-10986-193562021-04-23T14:03:51Z Predicting Bank Insolvency in the Middle East and North Africa Calice, Pietro 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 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. 2014-08-15T15:05:38Z 2014-08-15T15:05:38Z 2014-07 http://documents.worldbank.org/curated/en/2014/07/19875103/predicting-bank-insolvency-middle-east-north-africa http://hdl.handle.net/10986/19356 English en_US Policy Research Working Paper;No. 6969 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Middle East and North Africa North Africa Middle East

Predicting Bank Insolvency in the Middle East and North Africa

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