Estimation of Turkish banking sector financial fragility index and determination of the factors effecting the index

The concept of financial fragility defined as a stage in which the financial crisis has not yet occurred, but the symptoms of the crisis have been observed, that is an early warning indicator. The concept of financial fragility has come back to the agenda with the global crises experienced in recent years, making it necessary to investigate the factors that caused the crisis long before the crisis. In this study, theories about the impact on financial fragility were examined with an emphasis on banking crises. In the study covering the period 2006Q1:2022Q2 of 15 deposit banks in Turkey, the banking sector financial index was calculated for each bank and the impact of macroeconomic indicators that do not change according to banks and bank-specific proportional indicators on the index was examined. According to the hypotheses constructed in the study, the results obtained from the estimation of panel regression models containing the financial fragility index of the research show that increases in capital adequacy ratio, economic growth rate and real effective exchange rate reduce the financial fragility index, while increases in return on assets ratio, return on equity ratio, inflation rate, credit default swap, fear index and commercial loan interest rate increase the financial fragility index. Including non-performing loans variable in the index, it was intended to make an original contribution to the literature and also aimed to reveal the factors determining the index. Keywords: Banking Crisis, Banking Sector Financial Fragility Index, Financial Fragility, Panel Data Analysis, Turkish Banking Sector