MEASURING RESILIENCE OF THE BANKING SECTOR IN MALAYSIA
DOI:
https://doi.org/10.33736/ijbs.12820.2026Keywords:
Banking sector, resilience, optimal level, macroeconomic indicators, extraction signal approachAbstract
Financial crises followed shock and weakness in the financial system. The banking sector, which rules the financial sector in Malaysia and other regions, becomes influenced by banks’ financial crises. This study, therefore, aims to investigate the resilience of the Malaysian banking sector to increased banking system vulnerabilities. The study utilized early warning systems. It constructs a composite index using four selected macroeconomic and financial ratio indicators for the aggregate banking sector from January 2011 to December 2023. The main key results suggest that adequate macroeconomic indicators and banking performance can be used to improve banking fundamentals. The Non-Performing Loan (NPL) change is estimated to be between 0.98% and 1.22%, the Loan Deposit Ratio (LDR) between 80.02% and 81.48 percent, the Capital Adequacy Ratio (CAR) between 14.75% and 16.21 percent, and the Return on Assets (ROA) from 1.40% to 1.52%. Furthermore, inflation (INF) should be 0.10 to 0.17 %; exchange rate (ER) should be 3.49 to 3.80 Malaysian Ringgit (MYR) per USD; GDP growth should be 1.39% to 1.91% and Stock Market Index (SMI) growth should be 0.03% to 0.39%.
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