Title:
THE FUNDAMENTAL DETERMINANTS OF BANK DEFAULT FOR EUROPEAN COMMERCIAL BANKS

Authors:
Wiem Ben Jabra

Abstract:
Using the binomial Logit model on Panel data estimated over 2000–2019 on around 280 European commercial banks, the current paper attempted to examine the determinants of bank default in the context of the current financial crisis. The main objective was to investigate the potential effect of both CAMEL variables (capital adequacy, asset quality, management quality, earnings and liquidity), macroeconomic and institutional environment on the default of European commercial banks. To illustrate the impact of financial crisis, we subdivided the full period into before and during crisis period. Our results indicate the extent to which bank default in the European banking system can be explained not only by CAMEL variables but also by the GDP and SLR variables which are related to both macroeconomic and institutional environments.

Keywords:
Bank default, European banking industry, CAMEL variables, macroeconomic and institutional environment, financial crisis, binomial Logit model