Concentration Risk Analysis of Commercial Banks and its Relation with GDP and GNI: Comparison of Islamic and Conventional Banks in Pakistan

Rahman, Khalil Ur; Akram, Hassan; Noreen, Afshan

doi:10.26652/cjif.3201825

Cited by 1 publication

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“…Against this backdrop, the banking metrics adjudicators prefer the Capital Adequacy Ratio (CAR) to measure the bank's resilience against future adversities. In this regard, the Pakistan State Bank points out that the banks would have remained unfazed by unscheduled insomnia had they met the correct ratio (Rahman et al, 2018). The capital adequacy ratio is significantly related to bank stability in Pakistan's banking sector as a solid capital base temporizes the risks (Rahman et al, 2018).…”

Section: Capital Adequacy Ratio (Car) and Bank Stabilitymentioning

confidence: 99%

Venturing into Risk Management: Examining Credit Risk and Performance in Pakistani Commercial Banks through Panel VAR Analysis from a Business Perspective

Ali,

Jameel Ahmed

2024

JEBV

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In Pakistan's dynamic financial sector, effective credit risk management by commercial banks is critical to maintaining financial stability. In this study, we embarked on a unique and comprehensive journey, adopting the Panel Vector Autoregressive (PVAR) analysis, a novel methodology in this context. This approach allowed us to delve into the intricate relationship between credit risk management strategies and the aggregate business performance of commercial banks. The data used in this study spans from 2010Q1 to 2022Q4, investigating the comprehensive nexus of credit risk and macroeconomic indicators using a large dataset encompassing 18 strategically critical commercial banks of Pakistan. Our study uncovers several profound insights, documenting a remarkable increase in credit risk upon increases in the interest rate. The repercussions of the non-performing loans are observed nearly two years after the successive phases of a stern posture of monetary policy have been implemented. Our research findings carry significant weight for the banking industry. We discovered that the levels of credit risk could be reined in due to the protective shield offered by phases of sudden economic booms. This underscores the reinforcing effect of the improving economic conditions on defaults of loans, providing practical and actionable insights for credit risk management strategies.

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Section: Capital Adequacy Ratio (Car) and Bank Stabilitymentioning

confidence: 99%