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Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank >

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dc.contributor.authorPorath, Danielen_US
dc.description.abstractA healthy banking system is a fundamental condition for financial stability. When assessing the riskiness of the banking system, analysts often restrict their focus to large banks. This may create a distorted picture in countries like Germany with fragmented banking systems. In Germany, savings banks and cooperative banks taken together are important players in the market. However, little is known about their default risk. The reason is that these banks usually resolve financial distress within their own organisations, which means defaults are not observable from the outside. In this paper we use a new dataset which contains information about financial distress and financial strength of all German savings banks and cooperative banks. The data have been gathered by the Deutsche Bundesbank for microprudential supervision and have never before been exploited for macroprudential purposes. We use the data to identify the main risk drivers. To this end we estimate a default prediction model (hazard model). A second goal of the paper is to analyse the impact of macroeconomic information for forecasting banks' defaults. Recent findings for the USA have cast some doubt on the usefulness of macroeconomic information for banks' risk assessment. Contrary to recent literature, we find that macroeconomic information significantly improves default forecasts.en_US
dc.publisherDeutsche Bundesbank Frankfurt a. M.-
dc.relation.ispartofseriesDiscussion Paper, Series 2: Banking and Financial Supervision 2004,06en_US
dc.subject.keywordbank failureen_US
dc.subject.keyworddefault probabilityen_US
dc.subject.keywordtime-discrete hazard rateen_US
dc.titleEstimating probabilities of default for German savings banks and credit cooperativesen_US
dc.typeWorking Paperen_US
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

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