Modeling Financial Resilience in Commercial Banks using Multinomial Logistic Regression

Crises such as the 2008 financial crisis have plunged many commercial banks into the abyss of destruction, showing that existing approaches to date have not ensured the survival of financial firms. In the following years, based on the standards of Wing and ISO institutions, the concept of financialresilience has been considered with the aim of maintaining a system, including preventing the reduction of system performance and accelerating the return to pre-crisis conditions. In this study, we have reviewed the most important metrics to determine the status of financial resilience in a commercial bankusing multinomial logistic regression model. For this purpose, eight measures of asset structure, debt structure, capital adequacy structure, leverage rate, liquidity coverage ratio, competitiveness in the network, resource structure, and distribution diversity were identified. The situation of financialresilience is finally obtained in five categories of very low, low, medium, high, and very high. The performance of the measures is examined using the data of 50 Banks around the world, which were affected by the 2008 financial crisis but performed differently. The results indicated the properperformance of our developed was in differentiating the status of those banks. Therefore, this model could be very useful to decide how to improve financial resilience in banks to encounter with crisis situations.

Keywords:

Financial Resilience , Financial Risk , Commercial Banks , Multinomial logistic regression