THE FUZZY CLUSTERING ALGORITHM AND SELF-ORGANIZING NEURAL NETWORKS TO IDENTIFY POTENTIALLY FAILING BANKS

Using 1991 FDIC financial statement data, we develop fuzzy clusters of the data set. We also identify the distinctive characteristics of the fuzzy clustering algorithm and compare the closest hard-partitioning result of the fuzzy clustering algorithm with the outcomes of two self-organizing neural networks. When nine clusters are used, our analysis shows that the fuzzy clustering method distinctly groups failed and extreme performance banks from control (healthy) banks. The experimental results also show that the fuzzy clustering method and the self-organizing neural networks are promising tools in identifying potentially failing banks.