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Banking System Stability Index proposed to rank Banking Systems in different economies developed:IIF
The research study is published in Finance India –The Quarterly Journal of Finance, Vol. XXXIV No. 4, December 2020 issue titled "Developing the Banking System Stability Index (BSSI) : Comparison and Ranking of Banking System of 127 Countries". According to the authors of the study Prof. Aman Agarwal, Professor of Finance, Director (Rektor) & Dean (International Relations), Indian Institute of Finance and Prof. Yamini Agarwal, Professor of Economics and Finance, the proposed index (BSSI) would help evaluate the banking system of different countries in comparison to all other countries and within the specific regions. It would help governments, central banks, banks, financial institutions, global investors and retail investors take more informed decisions with respect to their investments depending upon BSSI. BSSI would also help policy makers in financial governance, economic development, financial stability and countries global ranking in the financial world.
It is for the first time that a comprehensive measure to study banking system stability has been developed for 127 countries. The countries have been classified on the basis of IMF classification into Advanced and Emerging Economies and developing economies. The vulnerability of the banking system because of the global financial crisis and rising NPAs necessitates the development of an index which indicates the stability of the banking system. There was an urgent need to assess and review the banking system stability world wide through a comprehensive measure.
IIF study attempts to fill the gap in the literature that exists between bank specific ranking done by Moody's and Financial system ranking done on the basis of FSIs. The six FSIs individually are found to be significantly different over the IMF classification of countries but not different over the time period.. The overall rankings without classifications are found to offer a much lower rank to advanced economies contrary to the expectations.
Indian Institute of Finance