Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270434 
Year of Publication: 
2023
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 4/2023
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This paper proposes an early-warning bank risk measure based on the syndicate concentration of recent syndicated loans that a bank participates in. At the bank level, higher values of the measure predict greater risks (i.e., loan loss provisions, idiosyncratic return volatility, default probability, and frequency of lawsuits) and lower profitability at least three years ahead, especially for opaque and complex banks. Banks failing the Federal Reserve's forward-looking stress tests subsequently exhibit a reduction in the syndicate concentration measure. At the aggregate level, higher values of the measure predict both greater financial sector risks and economic slowdowns measured by private-sector investment, business activity, total factor productivity, industrial production, and gross domestic product.
Subjects: 
syndicate concentration
early-warning
bank risks
financial sector risks
economic slowdowns
JEL: 
G21
E02
ISBN: 
978-952-323-433-8
Document Type: 
Working Paper

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