Investigating Factors Affecting the Financial Stability of Banks: Evidence from the Net Stable Funding Ratio Index

Document Type : Original Article

Authors

1 Ph.D. Candidate in finance, Department of Accounting and finance, Faculty of Economic, Management and Accounting, Yazd university, Yazd, Iran.

2 Department of Accounting and Finance, Faculty of Economic, Management and Accounting, Yazd University, Yazd, Iran

3 yazd university

Abstract

In this research, by using the Net Stable Funding Ratio, the factors influencing the financial stability of banks, including liquidity risk, credit risk, facility growth, bank size, profitability and income diversity, have been investigated. Therefore, considering the potential endogeneity problem, two-stage least squares (2SLS) method and panel data of 24 private and public banks of Iran in the period 1390-1400 have been used to achieve the research objectives. The results show that the increase in liquidity and credit risk has a negative and significant effect on financial stability, and the actions of banking sector policy makers when these two risks increase simultaneously, although it improves financial stability to some extent, it is not enough; Because the negative effect of liquidity risk is always dominant. In addition, the results show that the increase in bank size, profitability and growth of facilities have a positive and significant effect on the financial stability of banks, while increasing the ratio of non-interest income to interest income reduces the financial stability of banks. The research results support the strengthening of banking supervision and regulation with an emphasis on reducing credit and liquidity risk in the banking sector, because credit and liquidity risks have an adverse effect on bank stability. This study suggests managers to balance the financial stability of banks by maximizing profit and minimizing risk.

Keywords

Main Subjects

References

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Budget and Finance Strategic Research
Volume 5, Issue 2 - Serial Number 18
Summer Quarterly
June 2024
Pages 11-43

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History

  • Receive Date: 26 February 2024
  • Revise Date: 12 June 2024
  • Accept Date: 26 June 2024

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