Bank's Default Modelisation and Regulatory Factors: An Application to Banks from Emerging Market Economies

50 Pages Posted: 14 Sep 2004

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Multiple version iconThere are 2 versions of this paper

Date Written: July 2003

Abstract

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 and we also investigate the impact of several regulatory, institutional and legal factors on bank's default probability. 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. Also, the nationality of the first holding, deposits insurance system scheme, regulation and prudential supervision, and market structure have significant impact on bank's default probability in emerging market economies.

Keywords: Bank default, early warning signal models, CAMEL rating, regulatory, institutional and legal factors, emerging market economies, logit model

JEL Classification: C35, G21

Suggested Citation

Godlewski, Christophe J., Bank's Default Modelisation and Regulatory Factors: An Application to Banks from Emerging Market Economies (July 2003). Available at SSRN: https://ssrn.com/abstract=588182 or http://dx.doi.org/10.2139/ssrn.588182

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

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