Official Bankability Composite Score Thread

[Wisco]

Just read about this - my friend forwarded it to me. Very interesting approach to studying banks. I hope this will catch on and become a standard performance benchmark. Keep up the good work.

[hook]

Does this scoring algorithm take into account the size of the bank? Also some banks are own by other banks so does this score them all as one or individually? It also looks like the number of banks under 20 has been growing every quarter. Does it mean that the number of "dying" banks are growing? Thanks!

[Madmark]

Originally Posted by hook

Does this scoring algorithm take into account the size of the bank? Also some banks are own by other banks so does this score them all as one or individually? It also looks like the number of banks under 20 has been growing every quarter. Does it mean that the number of "dying" banks are growing? Thanks!

1.) This algorithm takes account of the bank's size (assets) for calculations but does not follow any specific way of using the "too big to fail" logic, if that's what you have in mind.

2.) This is a very valid question. Banks are considered individually. For example, if Bank A owns B and C, then each bank (A, B, and C) has its own ranks and score. However, if Bank A offers products B and C online (as a division), then B and C receive no ranks/scores since they are part of A. In short, each individual FDIC Insured Bank receives a FDIC Certificate Number from the FDIC and we treat them as individuals.

Of course, we have also seen banks being shutdown on the same day that belong to the same holding company - we believe this is with the FDIC considering all the subsidiary banks as a whole when making that decision. This is completely reasonable.

3.) Yes, the algorithm is showing the number of "below 20" banks has been growing. It would also be wise to consider the "below 20" along with the "20 to 40" banks. Those represent an overwhelming majority of all banks failed in the last 2 years.

[Financer]

45 banks have failed this quarter and it seems like all 45 are falling into the "under 20" category.

[Bankster]

Originally Posted by Financer

45 banks have failed this quarter and it seems like all 45 are falling into the "under 20" category.

Do you guys publish the complete set of banks with their respective probabilities of failing? I would love to see that list if available.

[Madmark]

Originally Posted by Bankster

Do you guys publish the complete set of banks with their respective probabilities of failing? I would love to see that list if available.

Hi Bankster,

The scores each of the current banks are available within the bank profiles pages (http://www.moneyeconomics.com/1911/bank_data.php). We don't make this list available in Excel format for business reasons.

We do publish a partial list of the scores at:
http://www.moneyeconomics.com/Saving...ailing-UPDATED

The list above only contains the scores to the lowest bracket of banks, namely those with scores under 20.

Now to answer the question about the respective probability of failing. It is very difficult to assess the likelihood of a failure give our current data set and there are many factors (eg. too big to fail? TARP protected? Government guaranteed?) that are still not fully understood within our analysis. So the published scores can be viewed as grades for each of the banks from us. It just so happens that many of the subsequent bank failures came with low scores.

Short answer: yes, we working on the probabilities part. We hope to have more results in that area in the future versions.

[Administrator]

Reports & Metrics for the new quarter should be available by the end of this week. This also marks the 1 year worth of report publication with the Bankability Composite Scores. We will run a series of reports pertaining to the state of banking using the scores in the upcoming weeks. Stay tuned.

[Madmark]

Failed Bank Score Data Thread has been updated. It now contains data and distribution graphs for bank failures up to 6/30/10.