Type of the article: Research Article AbstractThe digital transformation of banking is entering a new phase, shifting from mobile applications toward AI-driven, personalized services, yet the readiness of national environments for this shift remains largely unexamined. The study aims to assess the cross-country readiness of banking systems for this shift by integrating demand-side digital financial inclusion with supply-side government AI readiness in a single composite measure. To this end, an AI-Banking Readiness Index (ABRI) is constructed by two-stage principal-component analysis from the World Bank Global Findex (2011–2024) and the Oxford Insights Government AI Readiness Index 2025 for 97 economies; it is complemented by k-means clustering, a demand–supply positioning matrix, and cross-sectional and two-way fixed-effects panel regressions. Three findings follow. First, at the index level, the two sides of readiness are only moderately aligned (r = 0.655), and 28 of the 97 economies lead on one side only – a mismatch that supply-only rankings conceal. Second, across countries, government AI readiness is positively associated with deeper household digital-finance adoption once income is controlled (β = 0.451, p = 0.017). Third, within countries over time, e-government capacity is related to account ownership in a pattern consistent with an infrastructure-mediated channel; this constitutes suggestive channel evidence rather than a formal mediation test. Practically, the index locates each economy’s binding constraint: supply-led economies need demand-side activation through connectivity, interoperable payments, and digital literacy, whereas demand-led economies need AI governance and supervisory capacity before personalized, AI-driven services can scale safely. AcknowledgmentThis article was prepared based on the results of a study funded by the Ministry of Education and Science of Ukraine entitled “GovTech for Ukraine: A Digital, Secure, Transparent, and Equitable State in Times of War and Post-War Reconstruction” (registration number: 0126U000544)
Type of the article: Research Article AbstractWeak risk governance and legacy non-performing loans have repeatedly destabilized banks in emerging markets, making the payoff from regulatory strengthening of internal control and internal audit a first-order policy question. This study aims to determine whether Kazakhstan’s 2019 risk-management and internal control requirements (National Bank Resolution No. 188), whose core assurance mechanism is a strengthened internal audit function, improved the financial stability of the country’s commercial (second-tier) banks, and to identify the channel of this effect. The analysis applies a continuous-treatment difference-in-differences design to an annual panel of 37 banks over 2015–2025 (287 bank-years), interacting each bank’s pre-intervention (2016–2019) weakness with the post-intervention period and measuring stability by the log Z-score. The results show that the stabilizing effect is concentrated in the asset-quality channel: banks that entered the post-2020 period with a one-standard-deviation greater non-performing-loan weakness recorded a 0.38-0.41 log-point (roughly 40-50%) larger post-intervention increase in the Z-score (p < 0.01), whereas composite pre-intervention weakness yields no robust effect under any weighting scheme. The effect emerges with a multi-year lag, becoming statistically detectable only toward the end of the sample period, and operates through capital rebuilding. Because pre-intervention weakness strongly predicts market exit (Cox hazard ratio ≈ 3.95), the estimates are a lower bound on the intervention’s full association with sector stability. The findings imply that supervisors should target credit-risk governance, loan classification, timely recognition of problem loans, and provisioning, where strengthened internal control and audit yield the largest stability gains.
Type of the article: Research Article AbstractCore capital efficiency plays a central role in safeguarding banking sector resilience in emerging economies characterized by high credit risk, regulatory constraints, and limited access to external capital. This paper aims to examine the bank-specific, macroeconomic, and institutional determinants of core capital efficiency in the banking sector of emerging economies, using a comparative analysis between Bangladesh and Nepal as representative markets. Considering a balanced panel dataset of 200 observations from 10 banks in each country, spanning from 2014 to 2023, this investigation adopts pooled OLS, fixed effects, random effects, and GLS estimators with Tier 1 capital ratio as a proxy for core capital efficiency. Empirical results show that bank size and profitability exert a strong and positive influence on core capital efficiency, while non-performing loan ratios and cost-to-income ratios significantly erode capital efficiency across models. In contrast, GDP growth and fintech adoption show no significant impact, reflecting the dominance of bank-specific factors over macroeconomic or technological influences. Overall, Bangladeshi banks demonstrate higher core capital efficiency despite elevated credit risk, reflecting stronger asset bases and regulatory adjustments. The findings highlight the need for targeted reforms focusing on asset quality and cost efficiency to enhance banking sector resilience in emerging markets. AcknowledgmentThe authors would like to express their heartfelt thanks to all participants in this study, especially the bankers who assisted in providing their banks' datasets for the analysis presented in this paper.
Type of the article: Research Article AbstractThis study investigates whether competitive intensity and environmental complexity moderate the relationship between risk-taking and performance among rural banks in Central Java, Indonesia. The study was conducted in Central Java, Indonesia, during January-December 2024, using secondary data from the audited financial statements of 239 rural banks for the fiscal year ending December 31, 2024. Moderated regression models were estimated to examine the effects of credit risk (non-performing loan ratio), market risk (net interest margin), liquidity risk (loan-to-deposit ratio), and operational risk (operating expenses to operating income) on rural banks' performance (return on assets), and to test interaction effects with competitive intensity (Lerner index) and environmental complexity. The results indicate that net interest margin is positively associated with return on assets, whereas the operating expenses to operating income ratio is negatively associated; the non-performing loan ratio and loan-to-deposit ratio are not statistically significant. Lerner index and environmental complexity show no direct association with return on assets. However, the Lerner index strengthens the positive association between net interest margin and return on assets and exacerbates the negative association between operating expenses and operating income and return on assets. Environmental complexity weakens the positive association between net interest margin and return on assets. These findings suggest that market conditions and environmental complexity shape how risk indicators translate into rural bank performance in 2024, underscoring the importance of operational efficiency and adaptive risk management in competitive and complex environments.
Type of the article: Research Article AbstractThis study examines how the representation of women in corporate governance, particularly on boards of directors and audit committees, impacts the quality of bank earnings in Indonesia from 2001 to 2024. To evaluate the impact of women’s representation on bank earnings quality, the two-step Generalized Method of Moments (2SYS-GMM) estimation system was applied, measured through Discretionary Loan Loss Provisions (DLLP). The results show that the presence of women on the board of directors and in audit committee chair positions significantly improves earnings quality, whereas the presence of female independent directors and female audit committee members has no significant impact on earnings quality. However, the overall representation of women on these bodies has no significant effect. These results conclude that having women in leadership, particularly as chairs of the board of directors and audit committees, is crucial for improving the quality of bank earnings. Women in these roles have greater confidence to prioritize higher earnings quality. This study fills a gap in the current literature on the relationship between women’s representation in corporate governance and banking profit quality. Further, it offers valuable insights for banking practitioners, including policymakers, regulators, investors, management, and bank depositors.
Type of the article: Research Article AbstractBanking systems in emerging economies face mounting exposure to geopolitically induced shocks, yet the precise transmission pathways through which geopolitical disruptions translate into fundamental banking vulnerabilities remain poorly understood, particularly in the ASEAN region. This study examines how geopolitical risk propagates into credit, liquidity, and operational dimensions of banking stability across five major ASEAN economies during the period 2022–2024. Employing a quantitative panel design, the study draws on daily-frequency data from 75 conventional commercial banks operating in Indonesia, Malaysia, Singapore, Thailand, and the Philippines. The analytical framework integrates a newly constructed ASEAN Geopolitical Risk Index derived from text mining and Natural Language Processing applied to over 50,000 regional news articles with Vector Autoregression (VAR) estimation, fixed-effects panel regression, and network-based spillover analysis. Results demonstrate that geopolitical risk exerts a statistically significant positive effect on credit risk (NPL: β = 0.324, p < 0.01) and liquidity risk (LDR: β = 0.287, p < 0.01), while its effect on operational risk (BOPO: β = 0.198, p < 0.05) is heterogeneous across countries. Singapore and Malaysia exhibit superior resilience compared to Indonesia and the Philippines. Network analysis identifies a credit-to-liquidity contagion mechanism with a transmission lag of two to three trading days, and spillover intensity escalates non-linearly with geopolitical stress severity. The study contributes the first region-specific geopolitical risk index for ASEAN, a hybrid VAR-network methodology for systemic risk analysis, and actionable evidence for macroprudential policy design and early warning system development in the region.
Type of the article: Research Article AbstractFinTech growth in the Gulf has expanded digital access to banking services, but cyber-risk governance has not advanced at the same pace. This study develops and applies a quantitative framework to evaluate institutional, systemic, predictive, and probabilistic dimensions of cyber risk across Gulf financial technology ecosystems, including commercial banks, digital wallets, and payment platforms. The empirical design combined an application-level sample of ten leading mobile financial platforms with a vulnerability-level observation dataset generated through repeated static and dynamic security assessments between July 2024 and May 2025. The analysis integrated comparative statistical testing, extreme value modeling, dependency analysis, machine learning classification, and Bayesian estimation. The results revealed significant institutional divergence in vulnerability severities (p < 0.01), with Saudi Arabian Android banking applications recording the highest mean score (8.12) and UAE iOS applications the lowest (7.29). The risk distribution displayed a heavy-tailed structure, with a shape coefficient of 0.22 and a scale coefficient of 0.78, indicating that rare but severe vulnerabilities dominate exposure. Dependency modeling identified systemic linkages between platform type, regulatory environment, and vulnerability category, with correlations ranging from 0.29 to 0.36. Machine learning classification achieved 85% accuracy and 84% precision, while Bayesian estimation produced narrow 95% credibility intervals. The findings highlight distinct, quantifiable cyber-risk patterns across Gulf banks and FinTech platforms and support the need for integrated, data-driven supervisory frameworks.
Type of the article: Research Article AbstractThe shift toward digital banking has transformed how consumers build relationships with financial brands. As banking inter-actions increasingly occur through mobile applications and online platforms, understanding how emotional attachment is converted into customer loyalty has become important in digital banking research. This study aims to examine how the three dimensions of brand love – intimacy, passion, and commitment – influence customer loyalty through online brand experience, and how digital information overload moderates the relationship between online brand experience and customer loyalty. Data were collected from Vietnamese digital banking users through online and offline surveys conducted in June and July 2025. Respondents were required to have used their current digital banking brand for at least one year. After screening 593 responses, 527 valid questionnaires were analyzed using partial least squares structural equation modeling. The results show that intimacy and passion positively affect commitment, with path coefficients of 0.423 and 0.362, respectively. Intimacy, passion, and commitment positively influence online brand experience, with coefficients of 0.342, 0.314, and 0.280, respectively. Online brand experience strongly predicts customer loyalty (β = 0.637) and mediates the effects of intimacy, passion, and commitment on loyalty, with indirect effects of 0.218, 0.200, and 0.178. Digital information overload negatively moderates the online brand experience and loyalty relationship (β = –0.049). The findings confirm that emotional attachment strengthens customer loyalty through online brand experience, whereas excessive digital information weakens this process. AcknowledgmentThis research is partly funded by Industrial University of Ho Chi Minh City and University of Finance – Marketing.
Type of the article: Research Article AbstractThe growing use of Artificial Intelligence is revolutionizing bank operations and contributing to the emergence of financial platform ecosystems, especially in economies in transition with digital and regulatory transformation. little empirical research has been conducted on the effects of AI capabilities on the market performance of banks in integrated platform ecosystems, particularly in dual banking systems (commercial and Islamic banks). This study examines the influence of AI-based data analytics, AI-based automation, and AI-based decision-making systems on the market performance of Amman Stock Exchange-listed banks. It also explores the mediation of platform integration capability and the moderation of regulatory readiness. The study used a mixed-method approach with secondary market data from 2014–2025 and primary data from a survey of 368 valid observations of commercial and Islamic banks in Jordan in January-May 2025. The relationships were tested using Partial Least Squares Structural Equation Modeling. The findings indicated a positive impact of AI-powered data analytics (β = 0.29, p < 0.001), smart automation (β = 0.24, p = 0.001), and AI-powered decision support systems (β = 0.21, p = 0.002) on market performance. Digital platform integration capability partially mediated the relationships, while regulatory readiness positively moderated the effect of AI capabilities on market outcomes. It is argued that banks’ market performance can be improved by investing in AI capabilities along with a platform integration capability and regulatory readiness. The study offers insights for managers and policymakers to drive sustainable change in banking.
Type of the article: Research Article AbstractMobile banking has emerged as a critical delivery channel for banks, particularly in emerging economies such as India, where sustained usage is essential for realizing long-term value. Despite extensive research on adoption, relatively less attention has been given to post-adoption behavior. This study aims to examine the impact of mobile banking quality, perceived trust, and perceived risk on post-adoption behavior, specifically customer satisfaction and continuance intention, and to analyze the mediating role of customer satisfaction. Data were collected from 345 active mobile banking users in India through a structured questionnaire. The focus on active users ensures that the findings reflect post-adoption evaluations based on actual usage experience. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed to analyze the data, with mobile banking quality modeled as a second-order construct comprising service quality, system quality, and information quality. The results indicate that mobile banking quality has a significant positive effect on customer satisfaction (β = 0.567, p < 0.001) and continuance intention (β = 0.245, p < 0.001). Perceived trust positively influences customer satisfaction (β = 0.118, p < 0.05) and continuance intention (β = 0.322, p < 0.001), while perceived risk negatively affects customer satisfaction (β = −0.217, p < 0.001) and continuance intention (β = −0.129, p < 0.001). Customer satisfaction also significantly mediates the relationships between mobile banking quality, perceived trust, perceived risk, and continuance intention. The findings highlight the importance of improving overall mobile banking quality, strengthening user trust, and reducing perceived risk to enhance customer satisfaction and promote sustained usage.
Type of the article: Research Article AbstractThe rapid expansion of digital banking services has increased concerns regarding excessive and uncontrolled user behavior, particularly impulsive and compulsive usage patterns. This study aims to examine the effect of perceived ease of use (PEU) and perceived usefulness (PU) on compulsive digital banking behavior, with impulsive usage (IU) as a mediating mechanism. A quantitative approach was employed using a survey of 348 active users of digital banking applications, specifically Bank Jago and Allo Bank, selected through purposive sampling based on their experience in digital financial transactions. Data were collected online between April and June 2025 to reflect current digital banking behavior. The results show that PEU (β = 0.511, p < 0.001) and PU (β = 0.523, p < 0.001) significantly influence impulsive usage. Furthermore, PEU (β = 0.187, p < 0.001) and PU (β = 0.511, p < 0.001) have significant direct effects on compulsive usage, while impulsive usage also has a positive but relatively small effect on compulsive usage (β = 0.140, p = 0.021). These findings indicate that perceived usefulness plays a more dominant role in driving compulsive behavior compared to perceived ease of use. The study highlights that while digital banking systems enhance efficiency and user engagement, they may also increase behavioral intensity and potential risks related to excessive usage. Therefore, digital banking providers should integrate system performance with responsible design strategies, such as behavioral control mechanisms, to support sustainable financial behavior. AcknowledgmentThe authors would like to express their sincere gratitude to Universitas Pendidikan Indonesia and Universiti Kebangsaan Malaysia for the academic support and facilities provided during the course of this research. We also extend our appreciation to all respondents who participated in the survey and contributed valuable insights. Finally, we acknowledge the constructive feedback from colleagues and reviewers, which greatly helped in improving the quality of this paper.
Type of the article: Research Article AbstractThe rapid expansion of cross-border payments driven by digital banking and e-commerce has increased banks’ exposure to payment fraud, intensifying governance challenges in emerging-market financial systems. This study investigates the impact of corporate governance structures on cross-border payment fraud in Vietnamese commercial banks. The study applies Feasible Generalized Least Squares (FGLS) estimation to an unbalanced panel of Vietnamese listed banks over the period 2015–2024, examining a constructed bank-level cross-border payment fraud index in relation to key board-level governance characteristics. The empirical results show that board independence (β = −0.0009, p < 0.01), board meeting frequency (β = −0.0008, p < 0.01), directors’ financial or technological expertise (β = −0.0014, p < 0.01), and female board representation (β = −0.0006, p < 0.05) are significantly associated with lower fraud exposure, indicating that stronger monitoring intensity and governance-related expertise reduce fraud vulnerability. In contrast, CEO duality increases fraud risk (β = 0.0025, p < 0.01), suggesting that concentrated leadership weakens oversight effectiveness. These findings confirm that effective board independence, active monitoring, and governance expertise play a critical role in mitigating cross-border payment fraud in emerging-market banking systems.
Type of the article: Research Article AbstractWhether digital transformation in the public sector and in financial services jointly contributes to banking stability – or whether the two strands proceed along parallel trajectories – remains an open empirical question for post-socialist economies undergoing both reforms simultaneously. This study addresses the question in three components. First, a cross-country mediation analysis covers up to 130 economies over 2018–2024 (853 country-year observations), drawing on the World Bank GovTech Maturity Index, the IMF Financial Access Survey, and the IMF Financial Soundness Indicators, with panel OLS, country-clustered standard errors, and bootstrap mediation tests. Second, the results are decomposed via fixed-effect deviations for three post-Soviet economies from distinct EBRD regions: Ukraine, Armenia, and Kazakhstan. Pre-shock GovTech maturity is positively associated with digital banking adoption (β = +2.91, p = 0.017); sub-pillars differ in channel: core government systems for transaction intensity, public service delivery for account ownership. Bootstrap mediation tests do not support the indirect path through digital banking adoption (six specifications, lowest p = 0.132). GovTech maturity instead shows a substantial direct association with the non-performing-loan ratio – a 13-percentage-point reduction per unit increase in GTMI (p = 0.037) – plausibly operating through institutional infrastructure such as property registries, e-courts, and tax-credit information systems. The two strands are linked but not chained: GovTech is associated with digital banking adoption, yet the route to lower non-performing loans runs through institutional infrastructure. Country-level decomposition reveals heterogeneous GTMI trajectories and identifies reform priorities across public service delivery and core government systems. AcknowledgmentThis article was prepared based on the results of a study funded by the Ministry of Education and Science of Ukraine entitled “GovTech for Ukraine: A Digital, Secure, Transparent, and Equitable State in Times of War and Post-War Reconstruction” (registration number: 0126U000544).
Type of the article: Research Article AbstractIslamic finance plays a crucial role in promoting inclusive and sustainable economic growth, particularly in emerging economies such as Indonesia. Despite the rapid expansion of Islamic banking, participation from non-Muslim consumers remains relatively low, revealing a gap in understanding the motivational factors that drive their engagement. This study aims to analyze how the Islamic Product Brand Image influences Islamic Financial Inclusion among non-Muslim consumers through rational, emotional, and spiritual motivational factors. A quantitative research approach was employed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with data from 384 non-Muslim respondents who intend to use Islamic banking products in Indonesia. The analysis included tests of validity, reliability, and hypothesis using bootstrapping procedures. The results show that Islamic Product Brand Image does not directly affect Islamic Financial Inclusion (β = –0.187, p = 0.258), but has a significant indirect effect through Product Features (β = 0.164, p = 0.045) and Religiosity (β = 0.200, p = 0.031). Sustainable Finance, representing emotional motivation, was found to be insignificant (β = 0.093, p = 0.348). These findings indicate that rational and spiritual motivations are stronger determinants than emotional ones in influencing non-Muslim consumers’ inclusion in Islamic banking. Theoretically, this study contributes to understanding cross-religious financial inclusion by integrating multidimensional motivational constructs. Practically, it suggests that Islamic banks should emphasize product innovation, transparency, and ethical trust-building to enhance inclusivity across faith boundaries.
Type of the article: Research Article AbstractSystemic risk has emerged as a significant concern for financial stability, particularly in emerging markets that are susceptible to global financial disruptions. This paper examines the transmission channels of systemic risk within the Moroccan banking sector during significant crises, including the Subprime crisis, the European sovereign debt crisis, and the COVID-19 crisis. This study aims to characterize the Moroccan banking network, determine the key contributors to systemic risk, and analyze the mechanisms through which amplification loops exacerbate systemic risk under stressed market conditions. The complex dynamics of systemic risk transmission are captured by the ∆Conditional Value at Risk approach, which is represented as a directed weighted network, with topology indicators capturing the network position of financial institutions. The results indicate a pronounced core–periphery network, in which Attijariwafa Bank (AWB), Bank of Africa (BOA), and Banque Centrale Populaire (BCP) consistently form significant triangular feedback loops that amplify systemic risk across all examined periods. In-strength and out-strength centrality measures confirm their dominant positions as primary transmitters and receivers of systemic risk. In contrast, peripheral institutions play a comparatively less pronounced role within the network. Overall, the results point to a marked structural concentration of systemic risk within Morocco’s banking network and provide important implications for regulators and policymakers aiming to strengthen macroprudential oversight and safeguard financial stability.
Type of the article: Research Article AbstractThe article provides a comprehensive empirical assessment of the legal and operational regimes of digital asset circulation and their real impact on the financial market. To quantitatively measure the degree of state control, a composite Crypto Regulation Stringency Index (CRSI) was applied, constructed based on the OECD-JRC methodology. The index integrates 16 parameters across five fundamental areas (legal status, anti-money laundering, taxation, licensing, and consumer protection) for 61 countries (jurisdictions) as of 2025. The developed tool demonstrated high internal consistency and factor structure reliability (Cronbach’s α = 0.955).To determine the market consequences of legal regulation, the index values were compared with the Chainalysis 2025 Global Crypto Adoption Index. The direct unconditional correlation between the stringency of rules and the scale of digital asset usage proved to be weak. However, a multivariate regression analysis conditional on a set of macroeconomic and institutional covariates (income level, digital infrastructure development, financial freedom, quality of the rule of law, and the specifics of the MiCA regulation) revealed a robust and statistically significant positive relationship. The reversal of the effect is consistent with a Simpson-type compositional effect: within groups of countries with comparable levels of economic development, clear and strict regulatory rules stimulate market activity. The findings extend the literature on comparative financial law and demonstrate that state control does not suppress the crypto-economy but rather serves as its stable institutional foundation.
Type of the article: Research Article AbstractOne of the fundamental functions of commercial banks is providing credit to the public; however, with advancements in digital technology, this function is increasingly being performed by fintech lending companies as well. Accordingly, this study seeks to examine whether the growth of fintech credit in Indonesia acts as a substitute for or a complement to credit extended by commercial banks. The analysis utilizes monthly data from January 2018 to February 2023 and employs the Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run relationships between fintech lending and bank credit growth. The results indicate that the expansion of fintech credit exerts a positive and significant effect on the growth of bank lending, showing that fintech financing functions as a complement rather than a substitute. An increase in fintech credit is associated with an expansion of bank credit, implying that fintech lending enhances overall financial intermediation by reaching underserved segments and supporting credit distribution through formal banking channels. These findings suggest that fintech development does not crowd out bank lending but instead strengthens Indonesia’s credit ecosystem. The findings offer important guidance for regulators and other stakeholders in formulating suitable policies to respond to the rapid advancement of fintech services. With a balanced regulatory framework, effective oversight, constructive collaboration, and adequate digital infrastructure, Indonesia’s financial ecosystem has the potential for inclusive, efficient, and sustainable financial development.
Type of the article: Research Article AbstractThis paper investigates the determinants of bank profitability in Oman. It covers two broad categories of traditional factors that determine bank profitability, namely bank-specific variables: capital adequacy, credit risk, liquidity risk, and operational efficiency; and macroeconomic variables: economic growth, inflation, industry concentration, credit growth, and interest rates. Due to the nature and small size of the Omani economy, the industry-specific factors are clubbed with macroeconomic factors. The findings show that the p-value (0.00) is well below the 5% significance level for both ROE and ROA proxies, leading to the acceptance of the null hypothesis of no co-integration. Moreover, Fisher’s chi-squared test statistics are 145.742 for ROE and 150.224 for ROA, strengthening the absence of a long-term relationship between both bank-specific and macroeconomic variables. Co-integration vectors with Fully Modified OLS show that CPI (Inflation) does not significantly influence ROE (p = 0.280), indicating that explanatory variables have no significant impact on ROE at 5% significance level. Similarly, in estimating ROA, neither CPI (p = 0.146) nor GDP (p = 0.435) reflects a significant effect, suggesting that these macroeconomic variables do not have a co-integrating impact on profitability metrics. The study indicates that bank profitability in Oman is sensitive to both internal and external factors. However, the degree to which each determinant affects a bank’s profitability in Oman varies from that observed in international studies. The findings have important implications for decision-makers in the banking sector when developing appropriate strategies, considering the sensitivity of each factor indicated in our study to bank profitability. AcknowledgmentsWe express our gratitude to the management, staff, and students at the College of Banking and Financial Studies for their valuable support.
Type of the article: Research Article AbstractThe study analyzes the role of the Funding Gap (FGAP) as a dynamic structural liquidity indicator that influences bank financial stability in emerging markets, particularly amid heightened post-COVID-19 financial volatility. It aims to forecast banking stability by integrating advanced econometric and machine-learning techniques using a balanced panel dataset of 63 commercial banks from six ASEAN countries over the period 2010–2023. The methodological framework combines Ridge regression for variable selection, Particle Swarm Optimization (PSO) for hyperparameter tuning, and SHapley Additive exPlanations (SHAP) for interpretability within a Gradient Boosting model. The PSO-optimized specification achieves an R2 of 92.2%, substantially outperforming traditional fixed-effects and random-effects regressions. Empirical results indicate that persistent negative FGAP values significantly reduce Z-scores, confirming that structural liquidity imbalances constitute a key transmission channel from funding stress to systemic fragility. The analysis further reveals the moderating role of macroeconomic shocks, particularly inflation and the COVID-19 pandemic, in amplifying liquidity-induced instability. The proposed framework functions as an operational early warning system that enhances forecasting accuracy, model interpretability, and regulatory transparency, while repositioning FGAP as a forward-looking liquidity metric and offering both theoretical and practical contributions to financial risk management and supervisory practices in emerging economies.
Type of the article: Research Article AbstractThis study examines the post-decision announcements of the National Bank of Ukraine (NBU) during the pre-war and wartime periods from 2018 to 2025, focusing on changes in communication complexity and their subsequent impact on the anchoring of household inflation expectations. Based on various readability measures, we document a significant increase in the linguistic complexity of NBU communications during the war. For example, the Flesch-Kincaid Grade Level index indicates that the number of years of schooling required to understand NBU announcements increased by approximately one additional year. Despite these changes, we find no statistically significant effect on the gap between household inflation expectations and the NBU’s inflation forecast. At the same time, the expectations gap narrowed substantially during the war period, likely due to the convergence of households and NBU predictions under shock conditions. Moreover, the gap continued to narrow as inflation pressures eased. Our econometric analysis relies on dynamic specifications with robust inference to account for persistence, serial correlation, and structural breaks associated with the full-scale invasion. The findings contribute to the literature on central bank communication by providing rare wartime evidence from a small open economy, highlighting the limits of textual complexity as a policy tool for shaping household expectations.
