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What is Banking Crisis

Chapter 1
Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems
Banking crisis reflects the crisis of liquidity and insolvency of one or more banks in the financial system. Due to bank's sizable losses, bank encounters critical liquidity shortage to the extent this has disrupted its ability in repaying the debt contracts and the withdrawals demanded by depositors.
Published in Chapter:
Early Warning System for Banking Crisis: Causes and Impacts
Qaiser Munir (Universiti Malaysia Sabah, Malaysia) and Sook Ching Kok (Universiti Malaysia Sabah, Malaysia)
Copyright: © 2016 |Pages: 21
DOI: 10.4018/978-1-4666-9484-2.ch001
Abstract
The purpose of this chapter is to present with an overview of the early warning systems (EWS) applied to global banking crises. Numerous past studies have focused on the EWS of banking crisis. The majority of these studies have developed a predictive model to forecast the likelihood of banking crisis. Relatively less studies in the past show an attempt to predict both crisis likelihood and timing of the crisis likelihood. Precision of timing with respects to a specific type of financial crisis is undeniably difficult. Nonetheless, knowing the timing of crisis likelihood will make policy more effective. Policy makers will be able to response promptly to the upcoming banking crisis by taking pre-emptive measures which are crucial to mitigate the impact from the crisis. Specifically, this would help to avoid the widespread of crisis. It is aware that a banking crisis can transform into a systemic banking crisis which possibly ruins the function of the domestic financial system.
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Chapter 3
Predicting Global Financial Meltdown and Systemic Banking Failure: An Assessment of Early Warning Systems (EWSs) and Their Current Relevance
Refers to a subset of financial crises that are felt particularly acutely within the banking sector of local financial markets, and that are generally thought of as situations having national and international implications wherein either the given capital of the banking system is practically exhausted, or where non-performing loans or assets amount to or exceed 15% -20% of the overall capital infrastructure, or where the cost of resolving the problems of a financial system amounts to at least 3-5% of the national Gross Domestic Product.
Published in Chapter: Predicting Global Financial Meltdown and Systemic Banking Failure: An Assessment of Early Warning Systems (EWSs) and Their Current Relevance; From: Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems
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Chapter 11
KLR Approach as an Early Warning Indicator of Turkish Currency and Banking Crisis in 2000 and 2001
When a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run . Since banks lend out most of the cash they receive in deposits (see fractio nal-reserve banking AU74: The URL http://en.wikipedia.org/wiki/Fractional-reserve_banking has been redirected to https://en.wikipedia.org/wiki/Fractional-reserve_banking. Please verify the URL. ), it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run renders the bank insolvent, causing customers to lose their deposits, to the extent that they are not covered by deposit insurance. An event in which bank runs are widespread is called a systemic banking crisis or banking panic . Examples of bank runs include the run on the Bank of the United States in 1931 AU75: Anchored Object 2 and the run on Norther n Rock AU76: The URL http://en.wikipedia.org/wiki/Northern_Rock has been redirected to https://en.wikipedia.org/wiki/Northern_Rock. Please verify the URL. in 2007. Banking crises generally occur after periods of risky lending and resulting loan defaults.
Published in Chapter: KLR Approach as an Early Warning Indicator of Turkish Currency and Banking Crisis in 2000 and 2001; From: Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems
Full Text Chapter Download: US $37.50 Add to Cart
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