DefinePK

Abstract

This study focuses on the factors which are influencing a bank's systemic risk, the main variables are size, liquidity ratio, leverage ratio, deposit ratio, asset growth, net interest income ratio, and return on asset ratio. Data was taken from three countries of South Asia ranging from 2003 to 2021. 20 banks from all three economies are considered sample size, whereas data has been collected using various sources such as Annual Reports and Stock Exchange. Panel data is used for estimation purposes. The results show that larger banks with good deposits have very low impact on systematic risk whereas smaller banks with some liquidity issues have an impact on system risk within the banking industry. This also means that banks with good reputation, large deposits and high market share tend to mitigate the system risk. By looking at these insights, the present research recommends  policy measures such as increasing liquidity-to-assets ratio , focusing on net interest income, ensure strict measures towards motivating deposit-based financing so that systematic risk can be minimized.
Keywords: Bank capital, Systemic Risk, Assets, Liquidity ratio, Interest