Forecasting of BCC crisis, results of an empirical analysis

This paper analyzes the drivers of the financial distress experienced by Italian Cooperative Banks during the latest deep recession. It uses unique panel data to explain and predict the probability that a bank will become insolvent. The analysis investigates the importance of corporate financial structures as determinants of bankruptcy, including the standard accounting ratio in the Financial Statements of all the Italian cooperative credit banks (BCC): those more frequently subjected to the procedures prescribed by law as a result of serious corporate crisis in the years considered (2009-2012). An attempt is made to study the causes of the latter. The findings are robust and consistent across all specifications, showing that banks under financial stress are primarily subject to nonperforming loans issues. Moreover, banks’ profitability and banks’ financial statements are responsible.