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Can Financial Soundness Indicators Help Predict Financial Sector Distress?

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  • Marcin Pietrzak

Abstract

This paper shows how the role of Financial Soundness Indicators (FSIs) in financial surveillance can be usefully enhanced. Drawing from different statistical techniques, the paper illustrates that FSIs generate signals that can accurately detect, with 4 to 12 quarters lead, emerging financial distress—as measured by tight financial conditions.

Suggested Citation

  • Marcin Pietrzak, 2021. "Can Financial Soundness Indicators Help Predict Financial Sector Distress?," IMF Working Papers 2021/197, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/197
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    3. Vodová,Pavla Klepková & PaleÄ ková,Iveta & Stavárek,Daniel, 2023. "Banking Stability and Financial Conglomerates in European Emerging Countries," Cambridge Books, Cambridge University Press, number 9781009095112, November.
    4. Tihana Skrinjaric, 2023. "Leading indicators of financial stress in Croatia: a regime switching approach," Public Sector Economics, Institute of Public Finance, vol. 47(2), pages 205-232.

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    More about this item

    Keywords

    LV crises dataset; ROC curve; LD crises dataset; tight financial conditions; LV crisis; Financial soundness indicators; Capital adequacy requirements; Banking crises; Early warning systems; Global;
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