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What is Systemic Banking Crisis

Handbook of Research on Financial and Banking Crisis Prediction through Early Warning Systems
Refers to a banking crisis that might be defined as systemic or entrenched if two key conditions are met: firstly that significant signs of financial distress are in a majority part of the banking system, as indicated by significant bank runs, losses in the banking system, and/or in the form of bank liquidations; and secondly, significant banking policy intervention measures are implemented by the appropriate financial authorities in response to significant losses amongst the individual components of the banking system.
Published in Chapter:
Predicting Global Financial Meltdown and Systemic Banking Failure: An Assessment of Early Warning Systems (EWSs) and Their Current Relevance
Shefali Virkar (University of Oxford, UK)
DOI: 10.4018/978-1-4666-9484-2.ch003
The last two decades of international financial history have witnessed an unprecedented increase in the number of episodes of financial distress; wherein the incidence of these episodes has not been restricted to national boundaries as localised systemic incidents but have instead been spread to other countries and across regions in the form of financial contagion. This book chapter proposes a detailed discussion and analysis of the scholarly and practitioner literature used to conceptualise and to encapsulate the theoretical construct of an Early Warning System (EWS) developed to predict and mitigate the onset and persistence of systemic banking failures and financial crises. The models that constitute the focus of this overview are pivotal to the prediction of systemic banking meltdowns, either on their own or as constituent elements of other methodological approaches that contribute significantly towards the design and development of an Early Warning System.
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Early Warning System for Banking Crisis: Causes and Impacts
Systemic banking crisis reflects the nationwide banking crisis which its impact spreads to the whole banking sector. In other words, the crisis is affecting the entire banking sector. In which, domestic banks experience a large number of defaults by borrowers, leading to a sharp increase in the banking sector's non-performing loans. When the crisis is systemic, total banks' losses is beyond the banking system capital.
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