Banking Crisis and Political Risk: What’s the Connection?

Given recent issues and concerns about the banking sector, it’s instructive to disentangle some of the root causes – which, in some cases, are not as apparent as they might seem at first.  It’s also worthwhile to look beyond the problems facing banks in developed market countries.

Below is a selection of IMF, NBER, and Bank of Canada working papers that deal with a range of topics affecting the banking sector and overall financial fragility using our ICRG risk metrics and data series.

Political booms – measured by the rise in governments’ popularity – predict financial crises above and beyond other, better-known, warning indicators:

(https://www.nber.org/system/files/working_papers/w20346/w20346.pdf)

Whether rising conflict and political instability globally over the past several decades led to increased occurrence of banking crises in developing countries.

(https://www.imf.org/en/Publications/WP/Issues/2020/02/28/The-Impact-of-Conflict-and-Political-Instability-on-Banking-Crises-in-Developing-Countries-49047)

The role of governance mechanisms as a means of reducing financial fragility

(https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=f43e5b50c055eccbe1a06e1c374d49cd8ae1938c)

The PRS Group: Challenging Borders, Challenging Risk

www.prsgroup.com