Using Index for Predicting Banking Crisis in Asian Countries

Abstract

This study aims to develop predictive models of the banking crisis in Asia by utilizing methods of measurement indices in the banking crisis. The CD index is used as a measure of the crisis which includes four components, namely liquidity risk, credit, investment, and exchange rates that is combining of BSS index and BSF index. This research used six countries in Asia for a sample and logit analysis during observation period 1997-2012. The results show that the banking crisis in Asia affected by the decline in real GDP and inflation rate, an increase in the capital adequacy ratio, increasing of profitability ratios ROA, ROE and decreasing of ratio of interest income to operating income, decreasing of liquidity ratio, increasing of sensitivity to market ratio, declining in institutional quality, and increasing in US real interest rates.