Banking risks and the risk of banking : A quantitative study on risk for banks using key indicators

Abstract: The financial sector plays a key role in each country economic system. Banks tend to have the biggest influence in this sector and play a major role in a country's economic development and wealth. In this case Banks are different to other large companies, and nowadays we can even see that banking is getting more and more globalized and even universal. But even banks suffer decline and times of lack in prosperity. This is often shown in financial crisis where banks tend to hurt more than other large companies, such as the financial crisis in 2007-2009. There are models and key indicators that can measure a bank's overall performance and how well it would stand in times of financial decline, using variables and making calculation through key indicators from the banks. There are two ways a bank can be affected and influenced on; through internal- and external factors. Many of the models being used today focuses on the internal factors, simply because they are the easiest to recover and for the banks to adjust and affect. This deductive study examines which key indicators can be used to measure the soundness of the largest banks in the Baltic Sea region, combining the internal factors with external factors to try to achieve a greater overall view from the most current financial periods of distresses to the current date.