Bank failure risk: Different now?

Motivated by the debate over similarities between the current and previous financial crises, logit estimates reveal significantly changed linkages between observable financial ratios and probabilities of subsequent bank failure using US data from the 1980s and 2008.

► Did the 2007 financial crisis have similar causes as prior crises? ► Relationships between financial ratios and bank failure risk have indeed changed. ► Some changes are both statistically and economically significant. ► Changes between the 1980s and 2008 exceed those within the 1980s crisis.