A rapidly growing empirical literature is studying the causes and consequences of bank fragility in present-day economies. The paper reviews the two basic methodologies adopted in cross-country empirical studies-the signals approach and the multivariate probability model-and their application to...

The author develops an empirical model to value a financial institution's capital for regulatory purposes, which when estimated for a sample of failed and nonfailed institutions, reveals the need for a market-value accounting approach to capital.