Bank's Default Modelisation: An Application to Banks from Emerging Market Economies
35 Pages Posted: 14 Sep 2004
Date Written: July 2003
Our work follows the early warning signals litterature. We propose to test the validity of the CAMEL rating typology for bank's default modelisation in emerging markets. We focus explicitely on this type of economies. Using a logit model applied to a database of defaulted banks in emerging markets, we find the principle results of the early warning signals models which follow the CAMEL typology. The proxy variables of bank solvability, assets' quality and liquidity, particularly loan losses provisions, management quality, profitability, and intermediation rate have a negative impact on the one year probability of bank's default.
Keywords: Bank default, early warning signal models, CAMEL rating, emerging market eonomies, logit model.
JEL Classification: C35, G21
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