Early warning signals and their role in preventing banking crises. The Czech Republic case.

In recent decades many countries have experienced banking crisis, for example Mexico (1994-1995), East Asian countries (after 1997) and transition economies (in 1990´s). The Czech Republic can not be omitted. The aim of this article is to characterise the role of early warning signals in measuring the vulnerability of countries to systemic banking crisis and to analyse how successfully these indicators could have been able to predict the banking crisis in case of Czech Republic. The first part of this paper defines the term banking crisis and describes indicators of banking crisis. The content of the second part of the paper are the individual early warning signals. The next part contains the characteristics of banking crisis in the Czech Republic. The last chapter tries to analyse the level of success of early warning signals in predicting the banking crisis in the Czech Republic