Banks’ stability can be affected by economic fluctuations, banks’ risk-taking behavior, connections among banks and countries’ financial system structure. At same time, banking regulation and supervision were designed to protect banks from failure, but a large number of banking crises weren’t prevented recently. Using binary response models for panel data and centering on OECD countries, this paper studies the main determinants of banking crises over a period of 19 years. Results suggest bank’s high debt and country’s low GDP growth rate as the major determinants of banking crises. There is also evidence of contagion between countries from the same region and from G7 to other OECD countries and that bank-based financial systems are less prone to crises. Regulatory and supervision practices are found to have been either not relevant (the former) or only marginally significant (the latter) in bankruptcy prevention.

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Banking crises, regulation, supervision, OECD countries, contagion effect