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Uncertain times and early predictions of bank failure

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  • Cullen F. Goenner

Abstract

The Great Financial Crisis shows that bank failure in the United States, while rare, is a concern during uncertain times. Interest here is in the ability to predict future failures at the start of a crisis, when the recent past has few events on which to base inferences. I show that policy makers using estimates based on the Savings and Loans crisis would identify in early 2009 that 2.0% of banks were in critical condition and 7.0% were unhealthy. This is comparable to the 1.7% of banks that failed within a year and the 3.9% of banks that would fail during the crisis.

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  • Cullen F. Goenner, 2020. "Uncertain times and early predictions of bank failure," The Financial Review, Eastern Finance Association, vol. 55(4), pages 583-601, November.
    • Handle: RePEc:bla:finrev:v:55:y:2020:i:4:p:583-601
    DOI: 10.1111/fire.12213
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    References listed on IDEAS

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