Machine learning can help spot bank distress – BoE paper
Use of confidential data helps catch distress early, and ML can cope with complexity, authors say
Machine learning (ML) models can help to build early-warning indicators of bank distress, researchers says in a new Bank of England working paper, published today (October 4).
In Predicting bank distress in the UK with machine learning, Joel Suss and Henry Treitel draw on confidential supervisory assessments of firm risk. They say this gives them an earlier insight into when a firm is deemed high risk. Other researchers have tended to focus on banks that have suffered “outright failure”.
They
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