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Open AccessArticle

A Comprehensive Stability Indicator for Banks

1
School of Business and Law, Edith Cowan University, 270 Joondalup Drive, Joondalup, WA 6027, Australia
2
Business and Economics Research Group, Ho Chi Minh City Open University, 97 Vo Van Tan Street, District 3, Ho Chi Minh City 73020, Vietnam
*
Author to whom correspondence should be addressed.
Risks 2020, 8(1), 13; https://doi.org/10.3390/risks8010013
Received: 29 December 2019 / Revised: 17 January 2020 / Accepted: 21 January 2020 / Published: 3 February 2020
Stability indicators are essential to banks in order to identify instability caused by adverse economic circumstances or increasing risks such as customer defaults. This paper develops a novel comprehensive stability indicator (CSI) that can readily be used by individual banks, or by regulators to benchmark financial health across banks. The CSI incorporates the three key risk factors of Creditworthiness, Conditions and Capital (3Cs), using a traffic light system (green, orange and red) to classify bank risk. The CSI achieves similar outcomes in ranking the risk of 20 US banks to the much more complex US Federal Reserve Dodd–Frank stress tests. View Full-Text
Keywords: banks; financial stability; capital; credit risk banks; financial stability; capital; credit risk
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J. Powell, R.; H. Vo, D. A Comprehensive Stability Indicator for Banks. Risks 2020, 8, 13.

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