Off-balance sheet exposures and banking crises in OECD countries

► Competing models for crisis prediction are evaluated, and a parsimonious model selected. ► Capital and liquidity form defences, high growth and current account deficits are problems. ► Off balance sheet activity did not increase risk before 2003, but was a major influence after. ► House price growth could have been used as an OBS proxy in pre 2006 early warning system. ► Regulation needs to monitor risks generated by (regulation driven) financial innovation.