Forecasting bank failures and deposit insurance premium

Abstract Logistic regressions are performed to estimate the probability of bank failure. The in-sample logistic regression analysis indicates that the higher the equity capital, profitability, or liquidity, the lower the probability of bank failure. On the negative side, the ratio of past due loans to total asset is the most stable factor contributing to bank failures over the sample period. Other failure contributing factors change over time. In addition, a numerical illustration is provided to calculate the actuarial fair deposit insurance premiums.

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