The effect of the COVID19 pandemic on the financial stability of the banking industry: the case of Eurasian Economic Union countries

The purpose of research is to identify the influence of bank-specific and macroeconomic variables on banking sector stability in the case of Eurasian Economic Union countries. For this purpose, it uses KASE and World Bank Database. The data was received from 10 commercial banks of the Eurasian Economic Union countries (Russia, Belarus, Kazakhstan, Kyrgyzstan, Azerbaijan, and Armenia) that cover the period 20162021.

Methodology is the panel corrected standard error model (PCSE) to observe the relation of dependent and independent variables. Altman Z-score is used as an indicator of financial stability. Return of assets (ROA) is an indicator of company profitability.

The originality / value of the research is a comparison of the factors that influence the stability and profitability of the banking industry in Eurasian Economic Union countries.

The estimation findings of the research indicate that bank-specific and macroeconomic strongly impact the financial stability in the banking sector. For example, asset quality and corruption control are significantly and negatively related with banks' stability. On the other hand, return on assets (ROA), bank size, political stability, and time dummy effect on the stability of the banking system are positive and statistically significant.

1. Adem, M. (2022). Impact of income diversification on bank stability: a cross-country analysis. Asian Journal of Accounting Research, (ahead-of-print), DOI: https://doi.org/10.1108/AJAR-03-2022-0093.

2. Pham, T. T., Dao, L. K. O. and Nguyen, V. C. (2021). The determinants of bank's stability: a system GMM panel analysis. Cogent Business & Management, 8(1), 1963390.

3. Tram, T. X. H., and Nguyen, T. N. (2020). Factors affecting the stability of commercial banks in Vietnam. International Conference on - CIFBA 2020, 545-555.

4. Karminsky, A. and Kostrov, A. (2014). Comparison of bank financial stability factors in CIS countries. Procedia Computer Science, 31, 766-772.

5. Dani§man, G. (2018). Determinants of bank stability: A financial statement analysis of Turkish banks. So-syoekonomi, 26(38), 87-103.

6. Aladwan, M. S. (2015). The impact of bank size on profitability "an empirical study on listed Jordanian commercial banks". European Scientific Journal, 11(34), 217-236.

7. Alharthi, M. (2016). The determinants of efficiency, profitability and stability in the banking sector: a comparative study of Islamic, conventional and socially responsible banks: PhD Thesis. Plymouth University, 328 p.

8. Kasri, R. A. and Azzahra, C. (2020). Determinants of Bank Stability in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 9(2), 153-166.

9. Rupeika-Apoga, R., Zaidi, S. H., Thalassinos, Y. E. and Thalassinos, E. I. (2018). Bank stability: The case of Nordic and non-Nordic banks in Latvia. International Journal of Economics and Business Administration, 6(2), 39-55.

10. Karkowska, R. and Pawlowska, M. (2017). The concentration and bank stability in Central and Eastern European countries. NBP Working Paper No. 272. Narodowy Bank Polski, Education & Publishing Department, 28 p.

11. Beniston, S. (n. d.). Liquidity. BDC Advisory Services. Retrieved December 20, 2022, from https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/liquidity#.

12. Davis, E. P. and Ali Abdilahi, R. (2022). Econometric Analysis of the Determinants of Bank Profitability in Three Major African Counties: Kenya, Nigeria and South Africa. NIESR Discussion Paper No. 536. National Institute of Economic and Social Research, 42 p.

13. Rahim, S. R. M., Hassan, N. M. and Zakaria, R. H. (2012). Islamic Vs. Conventional Bank Stability: “A Case Study Of Malaysia”. Prosiding Persidangan Kebangsaan Ekonomi Malaysia Ke VII, 840, 839-850.

14. Ghenimi, A., Chaibi, H. and Omri, M. A. B. (2017). The effects of liquidity risk and credit risk on bank stability: Evidence from the MENA region. Borsa Istanbul Review, 17(4), 238-248.

15. Dias, R. (2021). Capital regulation and bank risk-taking-new global evidence. Accounting & Finance, 61(1), 847-884.

16. Groeneveld, J. M. and de Vries, B. (2009). European cooperative banks: first lessons from the subprime crisis. International Journal of Co-operative Management, 4, 8-22.

17. World Bank. (2020). World Development Indicators 2020: From the World Bank Database. The World Bank.

18. World Bank. (2021). World Development Indicators 2021: From the World Bank Database. The World Bank.

19. Ozili, P. K. (2018). Banking stability determinants in Africa. International Journal of Managerial Finance, 14(4), 462-483.

20. Diaconu, R. I. and Oanea, D. C. (2014). The main determinants of bank's stability. Evidence from Romanian banking sector. Procedia Economics and Finance, 16, 329-335.

21. Baltagi, B. H., Demetriades, P. O. and Law, S. H. (2009). Financial development and openness: Evidence from panel data. Journal of development economics, 89(2), 285-296.

22. Kanapiyanova, K., Faizulayev, A., Ruzanov, R., Ejdys, J., Kulumbetova, D. and Elbadri, M. (2023). Does social and governmental responsibility matter for financial stability and bank profitability? Evidence from commercial and Islamic banks. Journal of Islamic Accounting and Business Research, 14(3), 451-472.

23. Parmankulova, I., Issakhova, P., Zhanabayeva, Z., Faizulayev, A. and Orazymbetova, K. (2022). The drivers of financial vulnerability and profitability: evidence from conventional and Islamic banks in Islamic finance-oriented countries. Journal of Islamic Accounting and Business Research, 13(6), 902-919, DOI: https://doi.org/10.1108/JIABR-06-2021-0155.