Determinants of bank credit risk: Empirical evidence from Malaysian banks

This study aims to examine the influence of bank specific (Financing Loss Provision (FLP), Risk Weighted Asset (RWA), Financing to Deposit (FD)) and macroeconomic (Gross Domestic Product (GDP) and Inflation Rate (IR)) on the credit risk of Malaysian Banks. Data of this study consist of 42 commercial bank listed under the Malaysian Central Bank between 2011 and 2018. The Multiple Regression Analysis was conducted in order to examine the factors that influencing the credit risk of the banks in Malaysia. The findings revealed that only two variables were found to be significant with the credit risk of all listed banks, which are FLP and GDP. Moreover, this study found that Islamic banks and conventional banks significant related to credit risk with result shows conventional gives more impact on non-performing financing than Islamic bank. There also significant result between local banks and foreign banks with credit risk, which result shows local bank, gives more impact on non-performing financing than foreign bank. The contributions of study are first, introduce new variable of local and foreign banks which is the different of credit risk between local and foreign banks in Malaysia. Second, result of this study contribute to the government as a policy maker by suggesting that the government should give attention more on financing loss provision and gross domestic product since these variables significantly influence the non-performing financing in Malaysia.