Developing the Banking System Stability Index (BSSI) : Comparison and Ranking of Banking System of 127 Countries

The paper develops a Banking System Stability Index (BSSI) based on the six IMF Financial Soundness Indicators (FSIs) given in the global financial stability report (GFSR-WB). It further tries to rank 127 countries which are classified by IMF The study attempts to fill the gap in the literature that exist between bank specific ranking done by Moody's and Financial System ranking done on the basis of FSIs. The six FSIs individually are found to be significantly different over the IMF classification of countries but not significantly different over the time period. The overall rankings without classification are found to offer a much lower rank to advanced economies contrary to the expectations. The BSSI index helps evaluate the banking system of the countries in comparison to the all other countries and within the specific regions helping governments, financial institutions, global investors and retail investor take more informed decisions with respect to their investment in the banking systems, financial governance, economic development, financial stability and countries global ranking in the financial world