Correspondence: Mario Quagliariello, Bank of Italy, Banking and Financial Supervision, Via Piacenza 6, 00184 Rome, Italy. tel: +39 064 792 3980; fax: +39 064 792 4360; e-mail: mario.quagliariello@bancaditalia.it

¹Mario Quagliariello has received a Laurea in Economics from the University of Rome (Italy) and a PhD in Economics from the University of York (UK). Since 1999, he has been working as an Economist at the Bank of Italy, Banking and Financial Supervision. His interests concern macro-prudential analysis and stress tests, Basel II Capital Accord and procyclicality, the regulation of financial conglomerates and cost of regulation.

Abstract

This paper provides a selected review of a large number of empirical studies on the relationship between business cycle and bank stability, both from a micro and an aggregate perspective. While not exhaustive, it tries to identify the common patterns of bank fragility, considering the evidence arising from works on banking sector crises, early warning systems and procyclicality of banks' behaviour. All these studies, even if starting from different points of view, have made it clear that the analysis of macroeconomic variables is of some help for banking supervisors in order to fully assess banks' health.