The Impact of Credit Risk and Liquidity on the Financial Stability of Iranian Commercial Banks: A Dynamic Panel Data Approach (GMM)

Financial stability of banks is a cornerstone of the banking system’s resilience and the overall economic stability of countries, being influenced by multiple factors such as credit risk, liquidity, and macroeconomic conditions. This study aims to investigate the impact of credit risk, liquidity, loan loss provisions, and other financial and macroeconomic determinants on the financial stability of Iranian commercial banks over the period ۲۰۱۳–۲۰۲۴. To analyze the short- and medium-term effects of these variables, a dynamic panel data approach using the Generalized Method of Moments (GMM) was employed. The dataset comprised annual reports of Iranian commercial banks and macroeconomic indicators obtained from the Central Bank of Iran and the Statistical Center of Iran. The findings indicate that credit risk and loan loss provisions exert significant negative effects on banks’ financial stability, whereas liquidity, profitability, capital adequacy, and bank size play supportive and reinforcing roles. Moreover, banks’ past financial performance and national economic growth have positive and substantial impacts on stability. These results are consistent with prior domestic and international studies, highlighting the critical importance of risk management, long-term planning, and the design of economic and regulatory policies to enhance banks’ resilience. Based on the findings, it is recommended that bank managers focus on precise monitoring of credit risk and non-performing loans, strengthening liquidity management tools, and continuously tracking operational and capital performance indicators. Policymakers should also revise regulatory frameworks and monetary policy instruments with an emphasis on maintaining banking stability and mitigating macroeconomic shocks.

کلیدواژه ها:

financial stability ، credit risk ، liquidity ، loan loss provisions ، commercial banks ، dynamic GMM