Commercial banking stability determinants in European Countries
Wiem Ben Jabra
The purpose of this paper was to investigate the determinants of banking stability in European countries. This study used a sample of 280 commercial banks in 26 European Banks from 2002-2019. The bank stability most common measure is the insolvency risk (Z-Score). We used the GMM estimator technique described by Arellano and Bover (1995) to estimate the impact of bank specific and macroeconomic variables on European bank stability across different European regions by subdividing the original sample into five sub-samples. We find significant differences in the determinants of stability between banks from East, South, North, South and Central European countries, respectively. We show that the impact of bank specific factors on bank stability differs across different European regions. We showed that the macroeconomic variables, especially the real GDP growth rate and inflation rate, have a strong effect on the bank stability. Therefore, an increase of the GDP growth rate systematically generates an increase of bank stability.