Predicting Bank Insolvency in the Middle East and North Africa / Calice, Pietro

Format:

Book

Government document

Author/Creator:

Calice, Pietro

Contributor:

Calice, Pietro

Series:

Policy research working papers.

World Bank e-Library.

Language:

English

Subjects (All):

Access to Finance.

Bankruptcy and Resolution of Financial Distress.

Banks and Banking Reform.

Debt Markets.

Early Warning Systems.

Finance and Financial Sector Development.

Financial Crisis Management & Restructuring.

Financial Stability.

Local Subjects:

Access to Finance.

Bankruptcy and Resolution of Financial Distress.

Banks and Banking Reform.

Debt Markets.

Early Warning Systems.

Finance and Financial Sector Development.

Financial Crisis Management & Restructuring.

Financial Stability.

Physical Description:

1 online resource (19 pages)

Place of Publication:

Washington, D.C., The World Bank, 2014

System Details:

data file

Summary:

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.