Measuring banking stress index in Iran and its threshold

In this paper we construct the banking stress index, basely on literature review. Sample and variable set ofthe study contains ۳۰ banks of Iran during ۲۰۰۶-۲۰۲۰ and their financial ratios. Well known soundness indicators,was used to explore the basic financial characteristics of the banks, and critical Thresholds were estimated based onthese characteristics. This paper finds that the negative overall risk indicator indicates the high risk of banks and itspositive, indicating the lower risk of banks. The negative stress index for capital adequacy, management quality,profitability and liquidity show that Banks in this group have performance indicators worse than the average of thebanking network and they are high risk banks. the positive index of asset quality indicates that banks in high riskbanks are in a worse position than the average of the banking network in terms of asset quality. In this group, theindex of market risk sensitivity is positive. The positive indicator indicates that banks in this group are more sensitiveto the market risk than the average banking network.

Keywords:

Banking stress index , critical threshold , High risk banks , Low risk banks