Financial Regulations and Banking Insolvency: Evidences from Pakistan's Banking Sector

Abstract

Financial regulations are most important to progress the liquidity and solvency of financial institutions for every country in the globe. Strict financial regulations may be making safe for bank stability. The study empirically investigates how the previously executed financial regulations enforce by state bank of Pakistan (SBP), have an effect on individual bank’s banking insolvency. This study employs sample of 09 commercial banks of Pakistan over a period of time2011 to 2015 on a quarterly basis in Pakistan. Unlike other studies, this study employs the total assets structure of commercial banks for categorization of commercial banks and categorized banks like large banks, medium banks and small banks. This study employs ZSCOR to compute the banking insolvency of commercial banks in Pakistan. Panel data analysis is used to describe the relationship between financial regulations and banking insolvency of commercial banks fora sample selected commercial banks in Pakistan.