Total Credit as an Early Warning Indicator for Systemic Banking Crises

5 Pages Posted: 28 Apr 2014

See all articles by Mathias Drehmann

Mathias Drehmann

Bank for International Settlements (BIS)

Date Written: June 2013

Abstract

Credit-to-GDP gaps are valuable early warning indicators for systemic banking crises. As such,they are useful for identifying vulnerabilities and can help guide the deployment of macroprudential tools such as the build-up of countercyclical capital buffers. In line with Basel III recommendations, credit-to-GDP gaps can be further improved by taking account of all sources of credit to the private non-financial sector, rather than just bank credit. Drawing on a new BIS database, this special feature finds that total credit developments predict the risk of systemic crises better than indicators based solely on bank credit.

JEL Classification: E44, G01

Suggested Citation

Drehmann, Mathias, Total Credit as an Early Warning Indicator for Systemic Banking Crises (June 2013). BIS Quarterly Review, June 2013, Available at SSRN: https://ssrn.com/abstract=2401567

Mathias Drehmann (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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