A MULTIVARIATE STATISTICAL ANALYSIS OF THE CHARACTERISTICS OF PROBLEM BANKS

AN EARLY-WARNING SYSTEM TO DETECT PROBLEM BANKS HAS BEEN DEVELOPED TO COMPLEMENT EXISTING BANK-EXAMINATION PROCEDURES. THIS SYSTEM USES MULTIPLE DISCRIMINANT ANALYSIS OF CHARACTERISTICS OF PROBLEM BANKS. PROBLEM BANKS ARE MATCHED WITH NON-PROBLEM BANKS TO ISOLATE CHARACTERISTICS OF THE FORMER. THE D...

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Bibliographic Details
Published in:The Journal of finance (New York) 1975-03, Vol.30 (1), p.21-36
Main Author: Sinkey, Joseph F.
Format: Article
Language:English
Subjects:
Bank capital
Bank examinations
Bank failures
Bank loans
Banking
Banking regulation
Banks
Commercial banks
Deposit insurance
Discriminant analysis
Federal Reserve Bank
Finance
State banks
Statistical analysis
Unit banking
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Summary:AN EARLY-WARNING SYSTEM TO DETECT PROBLEM BANKS HAS BEEN DEVELOPED TO COMPLEMENT EXISTING BANK-EXAMINATION PROCEDURES. THIS SYSTEM USES MULTIPLE DISCRIMINANT ANALYSIS OF CHARACTERISTICS OF PROBLEM BANKS. PROBLEM BANKS ARE MATCHED WITH NON-PROBLEM BANKS TO ISOLATE CHARACTERISTICS OF THE FORMER. THE DATA USED ARE FINANCIAL RATIOS GOTTEN FROM BALANCE-SHEETS AND INCOME-STATEMENTS. THE RATIOS MEASURE BANK-PERFORMANCE IN SUCH AREAS AS LIQUIDITY, CAPITAL ADEQUACY AND EFFICIENCY. THE ADVANTAGES OF THIS EARLY-WARNING ARE THAT BANK AGENCIES COULD MORE EFFICIENTLY ALLOCATE RESOURCES BY CUTTING THE COST OF EXAMINATION AND SUPERVISION PROCEDURES. MORE EFFICIENT USE OF PREEXAMINATION DATA WOULD BE POSSIBLE. IT WOULD PROVIDE BANK-REGULATING AGENCIES WITH AN EVALUATION OF THEIR EXAMINATION AND SUPERVISORY PERFORMANCES. FINALLY, IT WOULD PROVIDE A BASIS FOR ASSESSING DEPOSIT-INSURANCE PREMIUMS. TABLES.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.1975.tb03158.x