Green finance influences financial stability through nonlinear dynamics in BRICS countries with FinTech and financial development as complementary drivers

Green finance is expanding rapidly across the BRICS economies, yet little is known about whether this expansion supports or strains their banking systems. This paper examines the relationship between green finance and banking stability, as measured by the Z-score, in Brazil, Russia, India, China, and South Africa over 2005–2024. The question is whether that relationship is nonlinear and whether FinTech adoption and financial depth change the point at which it bends. What the paper adds to studies that treat these variables one at a time is a direct estimate of the curvature and a threshold expressed as a function of the two moderators rather than as a single number. A two-step system GMM estimator is applied to linear and quadratic specifications, the latter adding the square of green finance, as well as its interactions with FinTech development and financial depth. The quadratic model indicates an inverted U-shaped relationship: the linear term is positive (0.042), and the squared term is negative (− 12.603 × 10 −6 ), which places the unconditional turning point at about 1666 units of the green finance indicator, slightly above the sample mean. Both interaction terms are positive and significant, so the turning point moves to the right as FinTech adoption and financial depth increase (from roughly 2400 to 3870 units across the scenarios examined). Dumitrescu–Hurlin tests indicate two-way causality between stability and each of its determinants. Because the panel contains only five countries, the GMM results are read as indicative rather than definitive, and they are cross-checked against second-generation unit root, cointegration and structural-break tests that date the main shifts to 2008–2011 and 2021. Given the size of the panel and the unverified comparability of the green finance and FinTech series across countries, the policy message is conditional: green finance appears compatible with banking stability at the levels observed in most BRICS countries, but its marginal benefit shrinks at high levels. The room for safe expansion depends on the digital and financial infrastructure that accompanies it.