Today, banks play an important role by linking the real and monetary sectors of an economy. Banks, like other businesses, face different risks in which the most important one is credit risk. The purpose of this paper is examining the determinants of credit risk of domestic banks, during 2007-2013, using system Generalized Method of Moments (GMM). The results show that macroeconomic variables influence the credit risk of banks. In particular, real interest rate, inflation, public debt and unemployment rate have a positive correlation, and GDP growth rate has negative correlation with the credit risk. In addition, the bank characteristics such as size and profitability have negative effects, and credit risk of the prior period has positive effect on credit risk.