Determination of Factors Affecting Financial Fragility in Banks by Using Panel Quantitative Regression Technique

Zaim Reha YAÅžAR

Fiscaoeconomia, 2025, issue 1

Abstract: This study aims to reveal the financial fragility structures of the ten banks with the highest return on assets in the Turkish Banking System in high-risk, no-risk and medium-risk periods. For this purpose, firstly, a fragility index is created for each bank, and how and to what extent the obtained banking fragility index (BSF) is affected by some selected macroeconomic variables is examined. In the study, the Method of Moments Panel Quantile Regression (MMQR) model is used, and the macroeconomic determinants of the financial fragility index are investigated using the quantile regression technique. The study covers the period 2006:Q1-2022:Q2, and this period is analyzed by dividing into four percentile segments using the quantile regression technique. The findings obtained show that the return on assets, return on equity, and economic growth variables in the banking system reduce the fragility of banks' financial systems by increasing the financial fragility index. In other words, these indicators play a protective role by suppressing the fragile structure that may emerge in the financial system. In addition, the findings show that increases in commercial loan interest rate, exchange rate, inflation, and non-performing loan variables reduce the BSF to a more negative value and make the financial structures of banks more fragile. The findings indicate that the ten deposit banks with the highest return on assets do not carry the risk of financial fragility in Turkey in the relevant period.

Keywords: Financial fragility index; banking system; MMQR model (search for similar items in EconPapers)
JEL-codes: E43 F31 O11 O40 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fis:journl:250116

DOI: 10.25295/fsecon.1494062

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