Evaluate the Correlation between Credit Risk and Banking Safety Indicators (An Applied Study in Palestinian Commercial Banks 2012-2019)

Abstract

The study aims at assessing the correlation relationship between credit risk and the banking safety indicators considering them as tools that contribute in achieving the financial and monetary stability, and considering the developments that are accompanied by the banking vigor with financing risks and financial crisis. Examining these kinds of cases received a lot of attention from researchers and bankers. The researcher used the descriptive analytical approach and a case study method to achieve the objectives of the study, The sample of the study  consist of all local Palestinian commercial banks, and it includes the period from the year 2012-2019, The study reached to prove the hypotheses that there is a statistically significant correlation relationship at the function level (α ≤ 0.05 ) Between credit  risk and banking safety indicators in Palestinian commercial banks using the Pearson correlation coefficient, the results of multiple regression  analysis show the existence of a statistically significant effect between credit risk and banking safety indicators. The study recommended that Palestinian banks conduct a periodic assessment of the degree and level of credit risk and link them to banking safety indicators and publish these results in their annual reports. Moreover, the study recommended that there be diversification in the portfolio of Palestinian banks to include the entire economic sectors to prevent a financial crisis, and to strengthen their capital in order to find a balance in the capital structure in order to preserve the security and integrity of banking sector.