Abstract
If a financial organization flops, it can impose an externality nationwide as a whole. Augmented globalization along with deregulation of financial organizations has not only given rise to competition, but it has also amplified the need for powerful policies to manage risk for the industry. Being cautious of elements which might direct to failure of banking organization support in future for evading losses by introducing preemptive initiatives to minimize damage caused by risk. This study analyzes the factors affecting total risk in banking sector of Pakistan using sample data from 2006 to 2013. The results revealed that the size of bank, financial leverage, liquidity, loan to asset ratio, growth in real GDP, supply of money and spread of interest rates all seem to be statistically significant with total risk faced by bank. However, the ratio of loan losses remained statistically insignificant. This study stresses the insertion of macroeconomic factor as a probable determining factor for total risk.
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