Implementation of the banking dynamics model using a system of deterministic differential equations

Introduction This study discusses modeling the interaction among components of a bank’s balance sheet, consisting of deposit, loan, and equity, as a useful tool for analyzing risk conditions arising from factors such as non-performing loans (NPSLs) and deposit withdrawals. Methods The model utilizes a deterministic differential equation system based on a modified logistic growth model. Results When applied to data of selected banks in Indonesia under certain assumptions, the model effectively describes the growth of their balance sheets. Discussion Our findings indicate that banks with higher core capital do not necessarily exhibit more stable equilibrium than those with lower core capital. Additionally, the equity equilibrium does not show a consistent pattern among banks with varying levels of core capital.