Interdependence of Ratios in Banking Stability Pentagon
Interdependence of Ratios in Banking Stability Pentagon

Summary/Abstract: The banking sector is one of the key sectors in every economy, therefore, the issue of stability is one of the main interests not only of researchers but also policy-makers. The stability of the banking sector is especially important during a process of transformation. The aim of this article is to present a new tool for estimating the stability of the banking sector as a whole. Although the tool can be used to estimate the level of stability for all countries, the relationships between various variables and interdependence of the ratios used in the tool will differ between the countries surveyed, as tested in the article. The study is based on selected countries from two regions: the Western Balkans and the Baltic Sea states that are either in the process of transformation or have just completed that. Due to the choice of the banking sectors under study, it was possible to perform a comparative analysis between countries that have already undergone the transformation process and those that are currently in the transformation process. The survey is based on quarterly data for the period Q1, 2010–Q1, 2016. The data has been sourced from the International Monetary Fund.

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