The role of financial regulations in banking sector: An attempt to invetigate banking insolvency

Abstract

Financial regulations are most important to progress the liquidity and solvency risk of financial institutions for every country in the globe. Strict financial regulations may be making safe for bank stability. The study empirically investigates how the previously executed financial regulations enforce by state bank of Pakistan (SBP), have an effect on individual bank’s banking insolvency risk. This study employs sample of 09 commercial banks of Pakistan over a period of time 2012 to 2017 on a quarterly basis in Pakistan. Not at all like different studies, has this study utilized the aggregate resources structure of business banks for order of business banks and classified banks like expansive banks, medium banks and little banks. This study utilizes Z score to estimate the keeping money indebtedness of business banks in Pakistan. Board information examination is utilized to depict the relationship between monetary controls and saving money proficiency of business banks fora test chose business banks in Pakistan. The experimental results uncover that high hold proportion manual for diminish the keeping money productivity of little and extensive business banks. Besides, the outcomes additionally reveal that the capital sufficiency proportion is begun to be insignificant with managing an account proficiency for all specimen chose business banks in Pakistan. Similarly, liquidity ratio and nonperforming loans to total loans, loan to deposit ratio and reserve ratio have been found to be significant for large commercial banks while the capital adequacy ratio is found to be significant for medium and small banks in Pakistan