Low levels of bank capital and liquidity in combination with ongoing crises in other countries are shown to increase the probability of banking crises in OECD countries. Hence global coordination of regulatory reform is vital for reducing crisis risks.

Against the background of the acknowledged importance of off-balance-sheet exposures in the sub prime crisis, we seek to investigate whether this was a new phenomenon or common to earlier crises. Using a logit approach to predicting banking crises in 14 OECD countries we find a significant...