The Determinants of UK Credit Union Failure

36 Pages Posted: 25 Apr 2017

See all articles by Jamie Coen

Jamie Coen

Bank of England

William Francis

Bank of England

May Rostom

Bank of England

Date Written: April 21, 2017

Abstract

This paper examines the determinants of credit union failure in the United Kingdom. Using regulatory data on credit unions, we estimate several discrete-time logit models and evaluate their predictive ability at one, two and three-year time horizons. We find that a small set of financial attributes related to capital adequacy, asset quality, earnings performance and liquidity is useful for early identification of troubled credit unions. Both in and out-of-sample results indicate that this parsimonious set of firm-level characteristics, augmented with national and regional unemployment rates, reliably identifies failures while keeping false alarm rates at modest levels. The results provide support for establishing early-warning criteria for supervisory use in monitoring credit unions.

Keywords: Credit Unions; Failure; Early Warning; Logit; Policymaker Loss Function

JEL Classification: G21; G28; G38

Suggested Citation

Coen, Jamie and Francis, William and Rostom, May, The Determinants of UK Credit Union Failure (April 21, 2017). Bank of England Working Paper No. 658, Available at SSRN: https://ssrn.com/abstract=2957679 or http://dx.doi.org/10.2139/ssrn.2957679

Jamie Coen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

William Francis (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

May Rostom

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
81
Abstract Views
551
Rank
479,144
PlumX Metrics