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Title:	The relationship of household credit on banking stability index in Malaysia
Authors:	Nurhuda Nizar (ZP01921)
Supervisor:	Zulkefly Abdul Karim, Assoc. Prof. Dr.
Keywords:	Household credit Financial management Universiti Kebangsaan Malaysia -- Dissertations Dissertations, Academic -- Malaysia
Issue Date:	22-Jun-2019
Description:	The Asian financial crisis in 1997, Korean credit card crisis 2003, US subprime mortgage crisis 2007-2009, and European sovereign debt crisis 2010 have significantly left a bigger impact to the banking industry. The lessons learned from financial crisis throughout the world is worth highlighting because the main cause behind them is the need for a better monitoring tools to assess the banking stability. Therefore this study proposed a Banking Stability Index (BSI) as monitoring tools which can act as a tool to observe and monitor potential vulnerabilities and risks in the banking system. The BSI will be constructed using the 15 variables proposed by International Monetary Fund. These include both bank specific and macroeconomic variables, so that the BSI will be suitable for use in forming the policies of financial supervisors and regulators. Additional cause for concern lies in the fact that the ratio of household debt to GDP in Malaysia doubled in the seven years to 2016 to 88.4 percent, which is not only among the highest rates in Asia but is also growing faster than GDP. Thus, this study examined the influence of household credit on banking stability as previous literature claimed that household credit creates vulnerabilities not only to the economy, but to the banking sector as well. In addition to these main relationship, this study also contributes to the literature by segregating household credit into mortgage and consumer credit, whether any significant difference exists in terms of risk and cause to the banking sectors since mortgage credit has collaterals. The current study investigated the effect of banking specialisation, ownership and size on BSI and the effect of credits on BSI under these three categorisations. This study has obtained data on 37 individual banks for the period 2008 to 2015. The findings of the BSI as constructed for this study indicate that the greatest stability lies in conventional banks, foreign banks and large banks. Estimated results produced by the fixed-effects regression estimator indicate that a statistically significant negative relationship exists between the two forms of household credit (mortgage credit and consumer credit) and the stability of the banking sector. Meanwhile estimated results from the fixed effect panel threshold model indicates that only single threshold is adequate in explaining the threshold effect of household credit on the banking stability. It also shown that there is statistically significant positive relationship exists between BSI and household credit. This finding should offer valuable insights to financial regulators and the makers of macro prudential policy concerning the stability of Malaysia's banking system.,Ph.D
Pages:	199
Publisher:	UKM, Bangi
Appears in Collections:	Graduate School of Business / Pusat Pengajian Siswazah Perniagaan

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