Early Warning of Bank Failure in the Arab Region: A Logit Regression Approach

The global financial crisis of 2008 taught the biggest lesson anticipating a crisis. current study aimed to highlight importance central banks build early warning systems reduce costs resolution procedures weak banks. data was obtained from published annual reports and balance sheets 60 commercial in Arab region for period 2000-2010. Using logistic regression model predict performance or possibility bank failure an system, identified few indicators such as Capital Adequacy Ratio (CAR); Liquidity (LIQ); Cost Income CIR; Return On. Assets (ROA); Non-Performing Loans (NPL). impact GDP variable on bank`s also determined capture economic risks. results showed that soundness (FSI) can be used efficiently failure, variables ROA CAR had greatest probability bank’s survival, while no statistical significance seen variable. paper recommends stability banking supervision departments systems. would provide useful insights both household corporate sectors look signs sector countries. FSIs suggested play prominent role predicting success region.