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Examining the Resilience Response of Banks to Systemic Shocks: (Case Study of Iranian Stock Exchange Banks)
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Qader Mohammadpour Aghdam1   , Taimur Mohammadi *2 , Mehdi Adibpour Adibpour3 |
1- Islamic Azad University, Firoozkooh Branch
2- ALAMEH UNIVERSITY
3- Khomeini Shahr Branch, Islamic Azad University, Khomeini Shahr, Iran |
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Abstract: (323 Views) |
This study examines the resilience response of banks to systemic shocks and focuses on 14 active banks listed on the Tehran Stock Exchange between 2014 and 2024. The main objective is to identify bank characteristics that can demonstrate greater resilience to systemic shocks. Given the recent financial crises in Iran, such as currency fluctuations and sanctions that have exacerbated systemic shocks, this study is of particular importance because the Iranian banking system, as the main pillar of the economy, is vulnerable, and its resilience can prevent widespread crises. The research method is a new empirical approach based on Merton's (1974) distance-to-default model and panel data analysis using the fixed effects method. Accordingly, first, the distance-to-default (DD) is calculated for each bank, which indicates stability and resilience; then, the banking system distance-to-default index (IDD) is determined as the weighted average of the DDs. The βDD coefficient (beta distance to default) is calculated as a measure of each bank's resilience response to changes in systemic shocks. A panel regression model is used to examine the factors affecting this coefficient, including banking variables (such as size, leverage, liquidity, regulatory capital, etc.) and control variables (inflation, GDP growth, etc.). The results show that systemic shocks affect bank resilience, such that bank size has a positive effect on the intensity of the response, meaning that larger banks are less resilient and more prone to failure. Leverage increases this response, while liquidity and regulatory capital reduce it and strengthen resilience. The bank's asset-to-GDP ratio also has a negative response to resilience, highlighting the vulnerability of large banks to the domestic economy. Control variables such as inflation increase the response and reduce its real GDP growth. Finally, the findings suggest that systemic shocks can weaken bank resilience; however, strengthening stability through size limits and prudential regulations can moderate the response. This emphasizes the need to design regulations that are appropriate for Iran’s banking structure to prevent financial crises. It is suggested that the Central Bank of the Islamic Republic of Iran strengthen risk-based supervision and impose capital requirements on large banks. Sanctions and currency fluctuations have put significant pressure on banks, and policies such as strengthening liquidity and regulatory capital can moderate the effects of these shocks. Also, bank size limits prevent risk from being concentrated in a few large institutions (such as Mellat or Saderat).
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Full-Text [PDF 1814 kb]
(102 Downloads)
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Type of Study: Theoretical Article |
Subject:
Monetary Policy, Central Banking, and the Supply of Money and Credit (E5)
Received: 2025/08/14 | Accepted: 2025/11/18 | Published: 2026/03/29
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