Determinants of ASEAN Banking System Stability; Panel Regression Analysis of Z-Score and NPL

This research examines the determinants of banking stability in six ASEAN countries (2019-2023) using a microprudential framework. Analyzing 438 commercial banks through Fixed Effect Models, we measure stability via Z-Score (insolvency risk) and NPL ratio (credit risk). Results identify ROA as the most influential determinant—positively affecting Z-Score while reducing NPL—confirming profitability's crucial role in stability. Bank size negatively impacts both stability measures, suggesting larger institutions face systemic vulnerabilities despite their risk absorption capacity. Inflation enhances Z-Score, while GDP growth reduces NPL. Capital adequacy (CAR), liquidity (LDR), and efficiency (BOPO) show no significant effects. These findings emphasize that profitability management and strategic scaling are pivotal for enhancing financial resilience in ASEAN's banking sector.