Where AI and Banking Meet: New Quarterly Index Forecasts Bank Health

How BRG’s AI and banking teams joined forces to create a one-of-a-kind predictor of bank health—and what it can do for regulators, investors, and law firms

A few months into the pandemic, during a call with bank supervisors, David Abshier had an idea: amid rampant unemployment, an economic downturn, the acceleration of fintech, and a host of other unknowns, wouldn’t it be useful to be able to predict a bank’s health in the months ahead?

A former regulator, he knew an early warning system could have value from a supervisory perspective. But it also would help investors, private equity firms, and law firms make decisions related to bank health and conduct due diligence around potential bank M&A. Exploring the idea, he asked his colleague Craig Freeman, a leader of BRG’s Artificial Intelligence & Machine Learning team, “If we took all the publicly available bank call reports, could a machine learning algorithm find things in those reports that could predict bank health?”

More than a year’s worth of testing and collaboration later, BRG launched its Bank Health Index (BHI). The subscription-based index provides access to quarterly forecasts of bank health and to BRG’s banking experts, who can offer valuable context to the index’s leading-edge analytics.