The role of Early Warning indicators in predicting banking crises

Abstract

This study aims to analyze the role of early warning indicators in predicting banking crises, with an application to Libyan commercial banks. The  importance of the study stems from the recurrent banking crises in Libya as a result of ongoing economic and political challenges, which highlight the need for preventive mechanisms to reduce risks. The descriptive analytical method was adopted, and a questionnaire was used as the primary tool for data collection. The sample consisted of (92) participants, including managers, deputies, and heads of departments in the targeted banks. Data were analyzed using the statistical software (SPSS). The findings revealed a weak application of early warning systems, both in terms of analyzing economic and financial indicators and in the efficiency of risk management teams. Results also showed the absence of an effective communication system, which undermines the ability of banks to face crisis, in addition to the limited effectiveness of crisis management teams and weak institutional coordination. The study recommends developing and activating early warning systems within Libyan commercial banks, enhancing training programs for staff in crisis prediction and risk management,  strengthening internal communication channels, and establishing specialized crisis management teams