An assessment of bank safety of the Polish listed banks based on the integrated index for bank safety: empirical study

Abstract

Motivation: Safety is a key requirement in banking operations. However, it is difficult to maintain and measure through the significant variety and number of the determining factors. No uniform safety measure has been introduced so far that would allow to determine the level of safety and answer the question whether a bank is safe.

Aim: The aim of this paper is to parameterize the bank safety level from the perspective of internal determinants. For this purpose, the author proposes a new synthetic measure — an integrated index for bank safety (IIBS index), which is universal and allows for an assessment of the bank safety level in terms of capital adequacy, liquidity situation, degree of financial leverage and the size of capital buffers. The objective of the empirical study is to measure the safety level of 12 Polish listed banks in 2019 year and differentiate them according to their level of safety.

Results: In the empirical part, an attempt was made to measure the safety level of Polish listed banks in 2019 year. The study covers the 12 Polish listed banks on Bank Focus database and a financial statement review for 2019 year. The analyzed banks were differentiated according to their safety level. Furthermore, the most and the least secure banks were identified, as well as banks that did not meet the minimum regulatory requirements. Results of empirical study, namely the evaluation of bank safety level, will increase the trust the stakeholders have on the banking sector.