We explore for individual banks, active in the East Asian countries during the years 1996–1998, the performance of three sets of indicators of bank fragility that can be computed from publicly available information: accounting data, stock market prices, and credit ratings. We find significantly different patterns among the three groups of indicators in their ability of forecasting financial distress at a specific point in time and over time. More specifically, in the East Asia crisis episode the information based on stock prices or on judgmental assessments of credit rating agencies did not outpace backward looking information contained in balance sheet data. Stock market based information, though, has responded more quickly to changing financial conditions than ratings of credit risk agencies. Overall, the evidence supports the policy conclusion that, where the information processing is quite costly, as in most developing countries, it is important to use simultaneously a plurality of indicators to assess bank fragility.

We investigate whether financial markets reacted to the regulatory changes implied by the publication of the list of systemically important financial institutions (SIFI) and the new rules designed to address the too-big-to-fail problem of systemic banks. By applying event study methodology to a sample of 70 of the world’s largest banks, we assess whether the stock prices of SIFIs reacted significantly and differently from those of other large banks not deemed to be systemically important following the release of information regarding the methodology used to identify SIFIs and their new capital requirements; the disclosure of the first list of 29 SIFIs; and the publication of the updated list of 28 SIFIs. Overall, we determine that financial markets did not univocally react to the new regulation regarding SIFIs. However markets discriminated between high and low capitalized banks and they correctly estimated the probable effects of the additional capital requirements.