How well do aggregate prudential ratios identify banking system problems?

Martin Čihák*, Klaus Schaeck

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

36 Citations (Scopus)


Aggregate prudential ratios have become a mainstay of financial stability analysis. But how reliable are these indicators when it comes to distinguishing between strong and weak banking systems? We address this issue by analyzing the performance of aggregate prudential ratios in systemic banking crises, drawing upon a large cross-country dataset. We caution against sole reliance on these indicators, and advocate supplementing them with other tools and techniques. Nonetheless, our findings offer evidence that some of the ratios can help identify systemic banking problems.

Original languageEnglish
Pages (from-to)130-144
Number of pages15
JournalJournal of Financial Stability
Issue number3
Publication statusPublished - Sep 2010


  • Banking crises
  • Financial soundness indicators
  • Macroprudential analysis

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