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Identifying "problem banks" in the German co-operative and savings bank sector: an econometric analysis

Identifying "problem banks" in the German co-operative and savings bank sector: an econometric analysis
Identifying "problem banks" in the German co-operative and savings bank sector: an econometric analysis
This paper provides the first econometric analysis of problem banks in Germany. Drawing on an original dataset of distressed co-operative and savings banks, we develop early warning indicators for banking difficulties using a parametric approach. Taking the idiosyncratic characteristics of the German banking sector into account and controlling for microeconomic variables, we evaluate as to whether bank type and location matter. Findings indicate that banks in West Germany are less risky than credit institutions in the Neue Länder and that co-operatives are more prone to experience financial difficulties than savings banks. We conclude that a model that combines both savings and co-operative banks is sufficient to identify problem institutions up to three years prior to the surfacing of distress.
Schaeck, Klaus
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Wolfe, Simon
7a6df196-b8c9-49cc-9428-fcc2df477e13
Schaeck, Klaus
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Wolfe, Simon
7a6df196-b8c9-49cc-9428-fcc2df477e13

Schaeck, Klaus and Wolfe, Simon (2005) Identifying "problem banks" in the German co-operative and savings bank sector: an econometric analysis. MMF 2005: 37th annual conference of the Money, Macro and Finance Research Group, Crete, Greece. 31 Aug - 02 Sep 2005. 39 pp .

Record type: Conference or Workshop Item (Paper)

Abstract

This paper provides the first econometric analysis of problem banks in Germany. Drawing on an original dataset of distressed co-operative and savings banks, we develop early warning indicators for banking difficulties using a parametric approach. Taking the idiosyncratic characteristics of the German banking sector into account and controlling for microeconomic variables, we evaluate as to whether bank type and location matter. Findings indicate that banks in West Germany are less risky than credit institutions in the Neue Länder and that co-operatives are more prone to experience financial difficulties than savings banks. We conclude that a model that combines both savings and co-operative banks is sufficient to identify problem institutions up to three years prior to the surfacing of distress.

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More information

Published date: 2005
Venue - Dates: MMF 2005: 37th annual conference of the Money, Macro and Finance Research Group, Crete, Greece, 2005-08-31 - 2005-09-02

Identifiers

Local EPrints ID: 36588
URI: http://eprints.soton.ac.uk/id/eprint/36588
PURE UUID: 51c5d879-d699-4be1-ab71-7a1d488afee5
ORCID for Klaus Schaeck: ORCID iD orcid.org/0000-0001-9815-9535

Catalogue record

Date deposited: 25 May 2006
Last modified: 12 Dec 2021 02:46

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Contributors

Author: Klaus Schaeck ORCID iD
Author: Simon Wolfe

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