Abstract
The development of globalization creates a need for diagnosis of financial stability at the global level. This study aims to analyze the financial stability of the global banking system and identify threats to stability at the level of geographic regions and countries. The study uses the methods of a structured system, comparative and cluster analysis. The empirical study is based on World Bank data for 126 countries for the period 1998–2017. One of the key results of the study is the development of quantitative indicators of the financial stability of the world banking system. These indicators differ from the existing ones due to the predictive nature of the former. The study also proposes criteria of qualitative assessment of the level of financial stability of the world banking system and its individual elements in the form of regional and national banking systems. In addition, appropriate algorithms were developed to calculate the proposed indicators and criteria. The results helped to form clusters of countries in terms of the level of their banking system stability, compile maps of financial stability risks at the global level, and identify countries that are sources of potential threats to financial stability. The empirical part of the study confirms the practical applicability of the proposed analytical tools. The study shows that in 2017, the banking system of Asian countries moved to the high-risk zone. Potential threats to the financial stability of the global banking system come from the European and Asian banking systems, as well as from the Australian banking system. AcknowledgmentThe study was funded by the RFBR according to the research project No 18 010 00232 “A methodology of multilevel system of diagnostics and regulation of financial stability” year 2018–2020.
Highlights
The global financial crisis of 2008 exposed the disadvantages of the traditional banking regulation instruments, their inability to capture the accumulating systemic risks
This study aims to analyze the financial stability of the global banking system and identify threats to stability at the level of geographic regions and countries
One of the key results of the study is the development of quantitative indicators of the financial stability of the world banking system
Summary
The global financial crisis of 2008 exposed the disadvantages of the traditional banking regulation instruments, their inability to capture the accumulating systemic risks. A more detailed approach to sizing or a proportionality strategy can serve as reasonable alternatives to make the Basel standards more suitable for specific geographic regions These statements suggest that in order to further develop the regulatory reform, there is a need to diagnose the geo-financial vulnerability of the global banking system. Ruza et al (2019) developed a new indicator (CI) of the sustainability of banking systems in developed Summarizing the research results on the topic countries Using this indicator, they empirically shows that at the moment the studies focus mainly assessed the stability of a group of countries with on a comparative analysis of the financial stability more developed economies and two European of banking systems in developed and developing countries that were receiving financial support. Clude that the analysis of financial stability using the indicator (CI) allows for better identification of potential weaknesses in the stability of banking
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