| Summary: | Stability indicators are essential to banks in order to identify instability caused by adverse economic circumstances or increasing risks such as customer defaults. This paper develops a novel comprehensive stability indicator (<i>CSI</i>) that can readily be used by individual banks, or by regulators to benchmark financial health across banks. The <i>CSI</i> incorporates the three key risk factors of <i>Creditworthiness</i>, <i>Conditions</i> and <i>Capital</i> (3Cs), using a traffic light system (green, orange and red) to classify bank risk. The <i>CSI</i> achieves similar outcomes in ranking the risk of 20 US banks to the much more complex US Federal Reserve Dodd−Frank stress tests.
|
|---|
