Geo-financial stability of the global banking system

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The development of globalization creates a need for diagnosis of financial stability at the global level. This study aims to analyze the financial stability of the global banking system and identify threats to stability at the level of geographic regions and countries. The study uses the methods of a structured system, comparative and cluster analysis. The empirical study is based on World Bank data for 126 countries for the period 1998–2017. One of the key results of the study is the development of quantitative indicators of the financial stability of the world banking system. These indicators differ from the existing ones due to the predictive nature of the former. The study also proposes criteria of qualitative assessment of the level of financial stability of the world banking system and its individual elements in the form of regional and national banking systems. In addition, appropriate algorithms were developed to calculate the proposed indicators and criteria. The results helped to form clusters of countries in terms of the level of their banking system stability, compile maps of financial stability risks at the global level, and identify countries that are sources of potential threats to financial stability. The empirical part of the study confirms the practical applicability of the proposed analytical tools. The study shows that in 2017, the banking system of Asian countries moved to the high-risk zone. Potential threats to the financial stability of the global banking system come from the European and Asian banking systems, as well as from the Australian banking system.

Acknowledgment
The study was funded by the RFBR according to the research project No 18 010 00232 “A methodology of multilevel system of diagnostics and regulation of financial stability” year 2018–2020.

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    • Figure 1. Financial stability index of the global banking system (PR)
    • Figure 2. Percentage of countries in the risk zone and percentage of banking assets in the risk zone
    • Figure 3. Financial stability index of banking systems of the World and Asia
    • Figure 4. Financial stability index of the banking systems of the World, the EU, and Europe
    • Figure 5. Financial stability index of banking systems of the World, Africa, and Australia
    • Figure 6. Financial stability index of banking systems of the World, North America, and South America
    • Table 1. Qualitative assessment criteria of financial sustainability
    • Table 2. Risk zones
    • Table 3. Sample countries
    • Table 4. Indicators of financial sustainability of the global banking system (IPRg) and geo-subsystems (IPRc)
    • Table 5. Risk map of financial stability of geo-banking systems in 1998–2017
    • Table 6. Distribution of countries by the level of financial stability of their banking systems
    • Table 7. Geo- and national banking systems containing threats to the stability of the global banking system in the near future
    • Conceptualization
      Galina Gospodarchuk
    • Data curation
      Galina Gospodarchuk
    • Formal Analysis
      Galina Gospodarchuk
    • Funding acquisition
      Galina Gospodarchuk
    • Investigation
      Galina Gospodarchuk
    • Methodology
      Galina Gospodarchuk
    • Project administration
      Galina Gospodarchuk
    • Validation
      Galina Gospodarchuk, Nataliya Amosova
    • Visualization
      Galina Gospodarchuk, Nataliya Amosova
    • Writing – original draft
      Galina Gospodarchuk, Nataliya Amosova
    • Writing – review & editing
      Galina Gospodarchuk, Nataliya Amosova