Financial distress in Brazilian banks: an early warning model,

ABSTRACT This study aims to propose an early warning model for predicting financial distress events in Brazilian banking institutions. Initially, a set of economic-financial indicators is evaluated, suggested by the risk management literature for identifying situations of bank insolvency and exclusively taking public information into account. For this, multivariate logistic regressions are performed, using as independent variables financial indicators involving capital adequacy, asset quality, management quality, earnings, and liquidity. The empirical analysis was based on a sample of 142 financial institutions, including privately and publicly held and state-owned companies, using monthly data from 2006 to 2014, which resulted in panel data with 12,136 observations. In the sample window there were nine cases of Brazilian Central Bank intervention or mergers and acquisitions motivated by financial distress. The results were evaluated based on the estimation of the in-sample parameters, out-of-sample tests, and the early warning model signs for a 12-month forecast horizon. These obtained true positive rates of 81%, 94%, and 89%, respectively. We conclude that typical balance-sheet indicators are relevant for the early warning signs of financial distress in Brazilian banks, which contributes to the literature on financial intermediary credit risk, especially from the perspective of bank supervisory agencies acting towards financial stability.

摘要：本研究旨在提出一款用于预测巴西银行机构财务困境(financial distress)事件的早期预警模型(early warning model)。研究首先评估了由风险管理文献提出的一系列经济金融指标(economic-financial indicators)，这些指标用于识别银行破产(bank insolvency)情形，且仅基于公开可得信息。为此，本研究采用多元逻辑回归(multivariate logistic regressions)方法，将涉及资本充足率(capital adequacy)、资产质量(asset quality)、管理质量(management quality)、盈利水平(earnings)与流动性(liquidity)的金融指标作为自变量(independent variables)。实证分析以2006年至2014年的月度数据为基础，样本涵盖142家金融机构，包括私有、公有及国有银行，最终得到包含12136条观测值的面板数据(panel data)。在样本窗口期内，共出现9起巴西中央银行(Brazilian Central Bank)干预或因财务困境触发的并购案。研究从样本内参数估计(in-sample parameters)、样本外测试(out-of-sample tests)以及12个月预测期(forecast horizon)的早期预警模型表现三个维度对结果进行评估，三者对应的真阳性率(true positive rates)分别为81%、94%与89%。本研究最终得出结论：常规资产负债表指标可有效用于识别巴西银行财务困境的早期预警信号，该发现为金融中介信用风险相关研究领域作出了贡献，尤其是从旨在维护金融稳定的银行监管机构视角开展的相关研究。