Measuring the Fragility Index of Banking System in Iran

The banking system in Iran has been de facto¡ bestowed upon a prominent role of financing the economy¡ in toto. Thus¡ the persistent monitoring and supervising the banks stability beer the high priority¡ Sui generis. In this context¡ the review of literature implied that most of the studies devoted their efforts to build an index to measure the stability or fragility of banking system¡ per se. In this paper¡ an attempt is made to evaluate the fragility index of banking system in Iran¡ viz-a-viz deploying the monthly data for the period of 1972-2015. The results prima facie¡ indicate that in certain period of time¡ the Iranian economy has experienced the high volatility of fragility index in its banking system which in turn has paved the way for potential occurrence of banking crisis incidence. Though by virtue of flotation extended over concomitantly by the State Government and the Central Bank of the Islamic Republic of Iran¡ the tendency for outbreak of calamity have remained covert and grossly unobserved¡ Sine qua non.