Implementing the Banking Sector Soundness Index (Bss) for Predicting Banking Crisis

Abstract

Bank is financial intermediary that play important role in the economy. Banks can't be separated from external and internal factors that can cause financial distress. This study aimed to examine the effect of economic growth, inflation, the ratio of money supply, Capital (CAR), Asset quality (LAR), Management (MAN), Earning (ROA), Liquidity (FDR), and Sensitivity to market risk (SEN) towards predictions Islamic banking crisis in ASEAN using Banking Sector Soundness Index (BSS). The samples in this study are 24 Islamic bank in ASEAN (Indonesia, Malaysia, the Philippines, and Thailand). The results showed that the macroeconomic variables are economic growth and the exchange rate have negatively effect, while the inflation rate and the ratio of the money supply have positively effect. For the bank's internal factors, variable asset quality (LAR) has negative effect to banking crisis.