KnE Social Sciences
ISSN: 2518-668X
The latest conference proceedings on humanities, arts and social sciences.
Why the Stability of the Banking System Requires Information and Communication Technology: A Case Study in Asian Countries
Published date: Sep 10 2025
Journal Title: KnE Social Sciences
Issue title: The International Conference on Economic and Sustainable Development (ICESIDE)
Pages: 112 - 128
Authors:
Abstract:
Banking system stability is one part of financial system stability. If the banking system is unstable and experiences bankruptcy, it will affect the level of stability of the financial system and the economic conditions of a country. According to Warjiyo (2007), banking system stability is generally reflected in healthy banking conditions. The 10 Asian countries that are the subject of this study have an average Bank Z-score below the Asian average, but remain stable and do not experience bankruptcy. This study uses quantitative research methodology in the form of Panel Vector Error Correction Model (PVECM). The results showed that in the long run, information and communication technology indicators, with individuals using the internet, have a negative and significant effect on bank Z-score, and automated teller machines have a positive and significant effect on bank Z-score. While in the short term, information and communication technology does not have a significant effect on bank Z-score. The response of bank Z-score due to the shock of individuals using the internet shows a positive response at the beginning of the period, and the automated teller machine responds negatively to Bank Z-score in the first to fifth period, then in the next period bank Z-score shows a positive response. Individuals using the internet and automatic teller machines contribute more to the banking stability compared to mobile cellular subscriptions.
Keywords: banking system stability, information and communication technology, bank Z-score, individual using the internet, mobile cellular subscription, automatic teller machine, panel vector error correction model
References:
[1] Bai G, Elyasiani E. Bank stability and managerial compensation. J Bank Finance. 2013;37(3):799–813.
[2] Beck T. Bank competition and financial stability: friends or foes? Policy Research Working Paper. 2008 Jun 1(4656). Available from: https://doi.org/10.4337/9781785363306.00018.
[3] Otoritas Jasa Keuangan. Stabilitas sistem Keuangan. 2017.
[4] Babar S, Latief R, Ashraf S, Nawaz S. Financial stability index for the financial sector of Pakistan. Economies. 2019;7(81). Available from: ttps://doi.org/https://doi.org/10.3390/economies7030081.
[5] Arun T, Kamath R. Financial inclusion: policies and practices. IIMB Manag Rev. 2015 Dec;27(4):267–87.
[6] Wahyuningsih T. Pengaruh Ukuran (Size) Bank Terhadap Stabilitas Sistem Keuangan di Indonesia (Studi Kasus Bank Mandiri, Bank BRI, Bank BNI, dan Bank BCA Periode 2010-2016). Jurnal Ilmiah Mahasiswa FEB. 2017 Juli 21;5(2).
[7] Simorangkir I. Penyebab bank runs di Indonesia: Bad luck atau fundamental?. Buletin Ekonomi Moneter dan Perbankan. 2011;14(1):51–78. Available from: https://doi.org/10.21098/bemp.v14i1.456.
[8] Fauziah, Ayu F, Hidayatin NN. Inklusi keuangan dan Stabilitas Sistem Keuangan (Bank Z-Score) di Asia. Jurnal Ekonomi dan Kewirausahaan. 2020;14(1):30–47. Available from: https://doi.org/https://doi.org/10.33558/optimal.v14i1.2066.
[9] Beck T, Levine R. Stock Markets, Banks, and Growth : panel Evidence. J Bank Finance. 2002;28(3):423–42.
[10] Warjiyo P. Stabilitas Sistem Perbankan Dan Kebijakan Moneter : Keterkaitan dan Perkembangannya di Indonesia. Buletin Ekonomi Moneter dan Perbankan. 2007;8(4):429–54. Available from: https://doi.org/10.21098/bemp.v8i4.144.
[11] Hafeez U, Wang Z, Abas MG, Zhang F, Shahzad U, Mahmood MR. Association of Financial Distress and Predicted Bankruptcy: The Case of Pakistani Banking Sector. J Asian Finance Econ Bus. 2021;8(1):573–85.
[12] Khaddafi M, Heikal M, Nandari A. Analysis Z-score to Predict Bankruptcy in Banks Listed in Indonesia Stock Exchange. International Journal Economics and Finance Issues. 2017;7(3):326–30. Available from: http:www.econjournals.com
[13] Berger AN, Klapper LF, Turk-Ariss R. Bank competition and financial stability. J Financ Serv Res. 2009;35(2):99–118.
[14] Morgan P, Pontines V. Financial Stability and Financial Inclusion. SSRN Electronic Journal. 2014;(488). Available from: https://doi.org/10.2139/ssrn.2464018.
[15] Syed AA, Özen E, Kamal MA. Do digital financial services influence banking stability and efficiency: an ARDL analysis of a developed and a developing economy. InThe New Digital Era: Digitalisation, Emerging Risks and Opportunities 2022 Sep 15 (pp. 13-30). Emerald Publishing Limited https://doi.org/10.1108/S1569- 37592022000109A002.
[16] Morgan PJ, Zhang Y. Mortgage lending, banking crises, and financial stability in Asia and Europe. Asia Eur J. 2017;15(4):463–82.
[17] Shahriar A, Mehzabin S, Ahmed Z, Döngül ES, Azad MA. Bank stability, performance and efficiency: an experience from West Asian countries. IIM Ranchi Journal of Management Studies. 2022;2(1):31–47.
[18] Organitation for Economic Co-corporation and Development. OECD Bussines and Finance Outlook. 2018.
[19] Antao S, Karnik A. Bank Performance and Noninterest Income: Evidence from Countries in the Asian Region. Asia-Pacific Financ Mark. 2022;29(3):477–505.
[20] Muizzuddin TE, Hanafi MM, Setiyono B. Does Institutional Quality Matter in the Relationship Between Competition and Bank Stability? Evidence From Asia. Journal of Indonesian Economy and Bussines. 2021;36(3):283–301.
[21] Latumaerissa JR. Bank dan Lembaga Keuangan Lain. Jakarta: Salemba Empat; 2011.
[22] Alshubiri F, Jamil SA, Elheddad M. The impact of ICT on financial development: Empirical evidence from the Gulf Cooperation Council countries. Int J Eng Bus Manag. 2019;11:1–14.
[23] Del Gaudio BL, Porzio C, Sampagnaro G, Verdoliva V. How do mobile, internet and ICT diffusion affect the banking industry? An empirical analysis. Eur Manage J. 2021;39(3):327–32.
[24] Redda EH, Surujlal J. Measuring and Modelling Internet Banking Service Quality In South Africa. International Journal of eBussnines and eGovernment. 2017;9(2):137– 57.
[25] Berger AN, Mester LJ. Explaining the dramatic changes in performance of U.S bank: technological change, deregulation, and dynamic changes in competition. J Financ Intermed. 2003;12(1):57–95. Available from: https://philadelphiafed.org/community-development/publications/discussionpapers/ discussionpaper-camdenredevelopment.pdf
[26] Crawford GS, Pavanini N, Schivardi F. Asymmetric information and imperfect competition in lending markets. Am Econ Rev. 2018;108(7):1659–701.
[27] Pradhan RP, Mallik G, Bagchi TP. Information communication technology (ICT) infrastructure and economic growth: A causality evinced by cross-country panel data. IIMB Manag Rev. 2018;30(1):91–103.
[28] Kolli M, Amarouche KI. The impact of financial technology on financial stability in the MENA zone. Review of Socio-Economic Perspective. 2023;8(1):40–7.
[29] Ben Ali MS. Digitalization and Banking Crisis: A Nonlinear Relationship? J Quant Econ. 2022;20(2):421–35.
[30] Antwi F, Kong Y. Investigating the impacts of digital finance technology on financial stability of the banking sector: new insights from developing market economies. Cogent Bus Manag. 2023;10(3):2284738.
[31] World Bank. Global Financial Development Report 2013: Rethinking the role of the state in finance. World Bank, Washington, DC. 2023. Available from: https://www.worldbank.org/enpublication/gfdr
[32] Utari GA, Arimurti T, Kurniati IN. Optimal Credit Growth. Bulletin of Monetary Economics and Banking. 2012;15(2):2–36.
[33] Al-Naimi AA, Yaseen A, Alnaimat MA, Al-Abed S, Farooq UT. The Impact of Information and Communication Technology on Commercial Banks’ Performance: evidence from MENA. Uncertain Supply Chain Manag. 2024;12(3):1997–2004.
[34] Sang NM. Capital adequacy ratio and a bank’s financial stability in Vietnam. Banks and Bank Systems. 2021;16(4):61–71.
[35] Ariefianto MD. Fidela, Novianty JJ, Anestiawati CA. Peran Inklusi Finansial dan Tingkat Adopsi Teknologi pada Stabilitas dan Kinerja Perbankan: Suatu Studi Panel Lintas Negara. Jurnal Ekonomi Indonesia. 2022;11(1):63–78.
[36] Garcia A, Gavila S, Santabárbara D. What Explains The Low Profitability of Chinese Banks. J Bank Finance. 2009;33(11):2080–92.
[37] Ketaren EV, Haryanto AM. Pengaruh Kinerja Keuangan terhadap Stabilitas Perbankan yang Terdaftar di Bursa Efek Indonesia (Studi Kasus pada Bank yang Terdaftar di BEI Tahun 2014-2018). Diponegoro Journal of Management. 2020;9(2):1– 13. Available from: http://ejournal-s1.undip.ac.id/index.php/dbr
[38] Lotto J. Evaluation of factors influencing bank operating efficiency in Tanzanian banking sector. Cogent Econ Finance. 2019;7(1):1664192.
[39] Imbierowicz B, Rauch C. The relationship between liquidity risk and credit risk in banks. J Bank Finance. 2014;40(1):242–56.
[40] Perrson R. The short and long-term interdependencies between stock prices and dividends: A panel vector error correction approach. 2015.
[41] Enders W. Applied Econometric Time Series. 2nd ed. Canada: John Wiley and Sons; 2004.
[42] Sepehrdoust H, Ghorbanseresht M. Impact of information and communication technology and financial development on economic growth of OPEC developing economies. Kasetsart J Soc Sci. 2019;40(3):546–51.
[43] Hauswald R, Marquez R. Information Technology and Financial Services Competition. Rev Financ Stud. 2003;16(3):921–48.
[44] Cheng CY, Chien MS, Lee CC. ICT diffusion, financial development, and economic growth: an international cross-country analysis. Econ Model. 2019 May;2021(94):662–71.
[45] Vives X. The impact of FinTech on banking. Eur Econ. 2017;(2):97–105.
[46] International Monetary Fund. Cyber Risk and Financial Stability: It’s a Small World After All. 2020.
[47] Al-shrari TQ. How Do Financial Technology Products Affect Financial Performance? Evidence from Banking Sector. Migrat Lett. 2024;21:34–41.
[48] Ozili PK. Banking Stability Determinants in Africa. Journal of Managerial Finance. 2018;14(4):462–83. Available from: https://mpra.ub.unimuenchen. de/101825/1/MPRA_paper_101825.pdf
[49] Dwi DR. Stabilitas Bank: Sebuah Pengujian Berdasarkan Teori Resource Based View. Jurnal Ilmu Manajemen Dan Bisnis. 2019;10(2):187–96.
[50] Agboola A. Information and Communication Technology (ICT) in Banking Operations in Nigeria – An Evaluation of Recent Experiences. Retrieved December. 2006;25(2007);56
[51] Oliveira VB, Raposo C. How did regulation and market discipline influence banking distress in Europe?: lessons from the global financial crisis. Stud Econ Finance. 2020;37(1):160–98.
[52] Az Zahra AN, Miranti T. the Sharia Bank Stability: How Fintech and Financial Ratio Fixed It?. I-Finance: A Research Journal on Islamic Finance. 2023;9(1):51–69. Available from: https://doi.org/10.19109/ifinance.v9i1.17023.
[53] Kamran HW, Omran A, Arshad SB. Risk management, capital adequacy and audit quality for financial stability: assessment from commercial banks of Pakistan. Asian Econ Financ Rev. 2019;9(6):654–64.
[54] Gupta J, Kashiramka S. Financial stability of banks in India: does liquidity creation matter? Pac Basin Finance J. 2020;64(September):101439.
[55] Wheelock DC, Wilson PW. Why do banks disappear? The determinants of U.S. bank failures and acquisitions. Rev Econ Stat. 2000;82(1):127–38.
[56] Korbi F, Bougatef K. Regulatory capital and stability of Islamic and conventional banks. International Journal of Islamic and Middle Eastern Finance and Management. 2017;10(3):312–30.
[57] Pham TT, Dao LK, Nguyen VC. The determinants of bank’s stability: a system GMM panel analysis. Cogent Bus Manag. 2021;8(1):1963390.
