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Exploring risk resistant banking strategies: implications for sustainable practices

Author

Listed:
  • Ashik-Uz-Zaman

    (Bangabandhu Sheikh Mujibur Rahman Science and Technology University)

  • Md.Thasinul Abedin

    (University of Chittagong)

  • Md.Sharif Hossain

    (University of Dhaka)

Abstract

The subprime mortgage crisis has sharply traumatized the world financial system and subsequently put a question on the resilience. Even the commercial banks from a strong economy like the USA have experienced abrupt collapse. Such a scenario has induced deep concern among the stakeholders of the banking sector globally. Almost all the recent bank failure cases are centered on incapacitated risk governance mechanisms. Credit risk, liquidity risk and capital risks are the fundamental contributors of a risk management framework as per the recent empirical evidence and they are very much intertwined. We have explored the expert justification of the magnitude of these pivotal risks through an open-ended interview approach in order to formulate a sophisticated risk governance framework. We have also explored the determinants of these key risks using both the difference GMM and the System GMM approach on panel data from 2005 to 2020 of listed Bangladeshi banks. We have found that capital adequacy is significantly affected by asset turnover and cash in a positive manner, whereas management efficiency and non-performing loan (NPL) ratio negatively affect it. Asset turnover, experience and cost-to-income ratio negatively affect the credit risk, whereas NPL ratio and liquidity risk ratio influence it in a significant positive manner. Liquidity risk is significantly affected mostly by asset turnover, return on assets, cost-to-income ratio and credit risk. Following the empirical assessment, we have suggested a few policies for the regulatory authority with a view to making the banking practice more risk-resilient and sustainable.

Suggested Citation

  • Ashik-Uz-Zaman & Md.Thasinul Abedin & Md.Sharif Hossain, 2025. "Exploring risk resistant banking strategies: implications for sustainable practices," Future Business Journal, Springer, vol. 11(1), pages 1-18, December.
  • Handle: RePEc:spr:futbus:v:11:y:2025:i:1:d:10.1186_s43093-025-00441-w
    DOI: 10.1186/s43093-025-00441-w
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    More about this item

    Keywords

    Capital adequacy; Credit risk; Liquidity risk; Bank stability; Risk resistance; Sustainable banking practice;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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