How to foresee banking crises? A survey of the empirical literature

•An increasing amount of empirical research on the early warning signs of banking crises has been published.•A typical contribution explains the occurrence of crises with macrofinancial panel data.•Rapid credit growth, a current account deficit and a housing boom are typically observed during the build-up period.

A survey of the empirical literature on early warning indicators of banking crises is presented. Descriptive analyses have been published for decades, but cross-national panel data analyses have only been performed since the late 1990s. More recently, the severity of the subprime-Lehman crisis has been compared across countries. Most findings corroborate the view that during a typical build-up phase, banks borrow internationally to finance domestic lending, boosting the current account deficit and causing a real estate bubble. Increasing debt and imbalances lead to a crisis. Both developing and developed countries have experienced these kinds of boom-bust cycles.