EVALUATING OFF-strongBALANCEstrong SHEET EXPOSURES IN BANKING CRISIS.pdf

EVALUATING OFF-BALANCE SHEET EXPOSURES IN BANKING CRISIS DETERMINATION MODELS R Barrell, E P Davis, D Karim, I Liadze 1 NIESR and Brunel University Abstract: Given the evident effect that banks’ offbalance sheet activity has had on systemic vulnerability in the subprime crisis, we test for a consistent impact of offbalance sheet exposures on the probability of banking crises in OECD countries since 1980. Variables capturing offbalance sheet activity have been neglected in most early warning models to date, mainly due to the lack of the data. We find that the change in a proxy of offbalance sheet activity of banks derived from the share of noninterest income is significant in a parsimonious lo