Early Warning Signals in Banks

Signs of Distress: Common themes in troubled financial institutions: excessive growth, over-concentration, volatile earnings sources, asset and liability mismatches, dependence on unstable funding, Symptoms of a company's deteriorating credit standing: financial, non-financial and market indicators Structured Analytic approach: Four step approach to focus on key issues: purpose, payback, risks and structure, Purpose of the exposure and sources of payback: importance of refinancing in financial institutions, challenges to downsizing assets and availability of external support. Operating Environment: Key macro economic and sector trends, which are likely to erode creditworthiness. Management and Shareholders: This section will focus on comparing management responses to a challenged sector. Business Risk: This section will focus on companies wit challenged business models and companies in crisis. Financial Risk: This section will focus on the stability of a company's funding structure and the ability to withstand solvency and liquidity crises