Impact of Banking Service Quality, Credit Risk, and Regulatory Regime on Financial Stability: Evidence from Iraqi Commercial Banks
Keywords:
Quality of Banking Service, Quality of Credit Assets, Quality of Performance and Credit Risk Management, Financial Stability.Abstract
This research seeks to examine the relationship between the quality of banking services, as perceived by banks, and its impact on enhancing the financial stability of banks, with quality being a key competitive factor in the contemporary banking sector, reflecting precision, speed, and efficacy of service delivery. The central research question is: "Does the quality of banking services contribute to enhancing financial stability?" The study primarily focuses on quantifying the independent variable—quality of banking services. The sample included 23 commercial banks, both private and Islamic, listed on the Iraq Stock Exchange for 2023, with data sourced from the official website of the exchange. Hypotheses regarding the correlation and causal relationship between the research variables were tested using statistical and financial methods via the SPSS program. Additionally, a questionnaire was distributed, and responses from 356 participants were analysed using Covariance-Based Structural Equation Modelling (CB-SEM). The results indicated that credit risk analysis and the regulatory regime positively contribute to the financial stability of banks in Iraq, while the supply of credit risk did not exhibit a significant relationship with financial stability. The study concludes that the quality of banking services significantly impacts financial stability and recommends that regulatory authorities focus on enhancing both the quality of banking services and credit risk analysis to improve financial stability in Iraqi banks. The study also identifies several limitations.