SENSITIVITY ANALYSIS OF THE BANKING SYSTEM - THE APPLICATION OF “SIGNAL” METHOD

This paper is an attempt of detailed analysis of macroeconomic and financial back-ground of the last banking crisis in Croatia which started in spring 1998. Taking the existing theoretical explanations of the banking crises’ causes as a starting point, it has been tested the possibility of usage of the new analytical and prognostic method – signal method, in establishment of the first domestic system of indicators for early notification of banking disruptions. The signal indicators systems enable continous observation of sensitivity level of banking market, and combined with other analytical methods they can represent a remarkable source of information for monetary and economic authorities about the level of financial stability in a country. This paper presents the beginning of a serious research undertaking, the final goal of which is development of efficient and dynamic system forearly notification of banking crises in Croatia.