A migration approach for USA banks' capitalization: Are the 00s the same with the 90s?

We conduct a comparison of the two past decades in terms of US banks' capitalization mobility and persistence, adopting a Markov Chain setup, based on the FDIC discretized version of capital ratio. We document several substantial differences in the anatomy of the two periods. In particular, system mobility has shown a step increase in the 00s, and what is more important, mobility takes the form of increased probability of capitalization deterioration. Moreover, the vulnerability of Critically and Significantly Undercapitalized banks has markedly increased, as shown by the corresponding default transition probabilities.