This paper measures the performance of different metrics in assessing banking system vulnerabilities. It finds that metrics based on equity market valuations of bank capital are better than regulatory capital ratios, and other metrics, in spotting banks that failed (bad apples). This paper...

A forward-looking view on bank resilience can be obtained through a combination of regulatory capital ratios, market valuations and insights from stress tests.Banks appear to have avoided the losses that once seemed likely given the severity of the pandemic shock, due in large part to policy...