The Determinants of Bank Risk: The Case of Tunisia
Purpose: Banks are financial intermediaries that channel funds from surplus units to deficit units. In doing so, they perform four key functions: liquidity intermediation, denomination intermediation, risk transformation, and maturity transformation. Due to the nature of these activities, banks are exposed to various types of risk, including liquidity risk, operational risk, credit risk, interest rate risk, and foreign exchange risk. This study aims to identify the main determinants of bank risk in the Tunisian context. Design/Methodology/Approach: Bank risk is measured using three indicators: risk-weighted assets to total assets (RWTA), non-performing loans (NPLs), and the Z-score. The empirical analysis is based on a sample of 11 banks listed on the Tunis Stock Exchange over the period 2014–2023. Panel data techniques are employed to estimate three econometric models. Findings: The results indicate that liquidity, total credit, return on equity, bank size, capital adequacy, economic growth, and inflation significantly affect bank risk. The findings suggest that both bank-specific factors and macroeconomic conditions play an important role in shaping risk levels in Tunisian banks. Originality: This study contributes to the existing literature by providing recent empirical evidence on the determinants of bank risk in an emerging economy, specifically Tunisia, over a relatively recent period marked by economic and financial changes. It also employs multiple risk measures (RWTA, NPLs, and Z-score), offering a more comprehensive assessment of bank risk compared to studies relying on a single indicator.