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Early warning models for bank supervision: Simpler could be better

Author

Listed:
  • Julapa Jagtiani
  • James Kolari
  • Catharine Lemieux
  • G. Hwan Shin

Abstract

Can computer-based models, using publicly available information, be used as off-site early warning systems (EWS) to identify banks that will become inadequately capitalized in the near future? The EWS models analyzed in this article are able to detect the early onset of financial distress one year in advance with a reasonable degree of accuracy. Although simple EWS models do as well as or better than more sophisticated ones, more sophisticated models could provide detailed information about individual bank strengths and weaknesses.

Suggested Citation

  • Julapa Jagtiani & James Kolari & Catharine Lemieux & G. Hwan Shin, 2003. "Early warning models for bank supervision: Simpler could be better," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 27(Q III), pages 49-60.
    • Handle: RePEc:fip:fedhep:y:2003:i:qiii:p:49-60:n:v.27no.3
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    References listed on IDEAS

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    Keywords

    Bank supervision;

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