The paper develops an early-warning model for predicting vulnerabilities leading to distress in European banks using both bank and country-level data. As outright bank failures have been rare in Europe, the paper introduces a novel dataset that complements bankruptcies and defaults with state...

This paper tests the hypothesis that stress tests are primarily a function of the fundamental financial condition and operating environment of individual banks, rather than alternative adverse economic and financial scenarios imposed by regulators. We develop a novel early warning system based...