Stability of Commercial Banks in Nepal

Abstract

The goal of this study is to identify the most important factors affecting the financial stability of Nepalese commercial banks. The financial data of selected Nepalese commercial banks was analyzed by using a panel data regression model (Fixed Effect Model). The findings of the study suggest that bank efficiency, profitability, and capital base are important internal variables, whereas banking sector development, GDP growth, inflation, and exchange rate are important external determinants in determining the financial stability of Nepalese commercial banks. Furthermore, the size of the bank, loan loss provision, and bank concentration are found to be minor determinants influencing the financial stability of Nepalese commercial banks. Key words: Bank Stability, Stability Factors, Panel data model, Nepalese Banking, Commercial Banks GEL Code: C330, E440, G210