The study presents a model for the early identification of crisis situations in less significant banks under the direct supervision of the Bank of Italy. To this end, the model allows us to estimate the probability of a bank defaulting over a time horizon of 4-6 quarters. The objective of the study is to expand the set of methodological tools suitable for anticipating the emergence of potential crisis situations in banking institutions.
The proposed model is calibrated based on an extended definition of possible bank crises. The analysis, based on a statistical approach, shows that the variables with the greatest forecasting power are related to the main risk profiles of individual banks: capital adequacy, credit, profitability, governance and control systems, and liquidity. The model can correctly classify between 80 and 90 per cent of institutions.
