Banking System Fragility: Likelihood Versus Timing of Failure: An Application to the Mexican Financial Crisis

IMF Working Papers, December 1, 1996

Source details

Canonical URL

Banking System Fragility: Likelihood Versus Timing of Failure: An Application to the Mexican Financial Crisis

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Robert Billings, Brenda Gonzalez-Hermosillo, Ceyla Pazarbasioglu
• Published: December 1, 1996
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451927535.001

Summary and central proposition

• This paper tests empirically the proposition that bank fragility is determined by bank-specific factors, macroeconomic conditions and potential contagion effects.
• The methodology allows for the variables that determine bank failure to differ from those that influence banks’ time to failure (or survival rate).
• Based on the indicators of fragility of individual banks, the authors construct an index of fragility for the banking system.

Key findings (as applied to Mexico)

• In the case of Mexico, bank-specific variables as well as contagion effects explain the likelihood of bank failure.
• Macroeconomic variables largely determine the timing of failure.

Methodology overview

• Distinguishes between determinants of (a) likelihood of bank failure and (b) timing of bank failure (survival rate).
• Constructs an index of banking-system fragility from indicators of fragility at the individual bank level.

Subject areas and keywords

• Subject: Banking, Commercial banks, Distressed institutions, Financial crises, Financial institutions, Loans, Nonperforming loans
• Keywords: bank, bank failure, bank fragility, banking sector, banking sector fragility, banking sector variable, Commercial banks, cost parameter, Distressed institutions, intervened bank, loan, Loans, Nonperforming loans, problem bank, WP