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Risk Management

, Volume 20, Issue 3, pp 242–257 | Cite as

In search of a measure of banking sector distress: empirical study of CESEE banking sectors

  • Paola Bongini
  • Małgorzata Iwanicz-Drozdowska
  • Paweł Smaga
  • Bartosz Witkowski
Original Article
  • 47 Downloads

Abstract

We tested the reliability of different versions of the Z-score and CAMELS-based financial strength indices (aggregated from bank-level data) in detecting periods of banking crisis on a sample of 20 Central, Eastern, and Southeastern European (CESEE) countries during 1995–2014. We demonstrated that the predictive power of both types of accounting-based measures is weak. Our results cast some doubt on their usefulness in academic research and in the macroprudential monitoring framework for emerging economies. Thus, there is a need to strengthen the informational content of accounting data through more frequent and higher-quality data disclosures, including exposures allowing for analysis of interconnectedness and network effects for systemic banking risk monitoring.

Keywords

Financial strength Z-Score CAMELS Crisis 

Notes

Acknowledgements

This work was supported by the Polish National Science Center (NCN) under Grant number UM0-2014/13/B/HS4/01619. The opinions expressed herein are those of the authors and do not reflect those of the associated institutions.

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Copyright information

© Macmillan Publishers Ltd., part of Springer Nature 2018

Authors and Affiliations

  • Paola Bongini
    • 1
  • Małgorzata Iwanicz-Drozdowska
    • 2
  • Paweł Smaga
    • 3
  • Bartosz Witkowski
    • 2
  1. 1.Milan-Bicocca UniversityMilanItaly
  2. 2.Warsaw School of EconomicsWarsawPoland
  3. 3.Warsaw School of Economics and National Bank of PolandWarsawPoland

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