Banking crises Regulation Supervision OECD countries Contagion effect
Issue Date:
2018
Publisher:
SPRINGER
Abstract:
Banks’ stability can be affected by economic fluctuations, banks’ risktaking
behavior, connections among banks and countries’ financial system structure.
At the same time, banking regulation and supervision were designed to protect
banks from failure, but a large number of banking crises were not prevented
recently. Using binary response models for panel data and focusing on OECD
countries, this paper studies the main determinants of banking crises over a period
of 21 years. Results suggest a bank’s high debt and a country’s low GDP growth
rate as the major determinants of banking crises. There is also evidence of contagion
across countries from the same geographical region and from G7 to other countries,
and that bank-based financial systems are less prone to borderline banking crises.
Regulatory and supervision practices are found not to have been relevant in
bankruptcy prevention.