Assessing the impact of macroeconomic uncertainties on bank stability: Insights from ASEAN-8 countries

•Macroeconomic uncertainties (MU) have significant impacts on bank stability in ASEAN countries.•Geopolitical risk (GPR) is positively correlated with bank stability while economic policy uncertainty (EPU), climate policy uncertainty (CPU), world pandemic uncertainty (WPU), global supply chain pressure (GSCP), and monetary policy uncertainty (MPU) negatively affect bank stability in the ASEAN region.•The main findings are robust and supported by alternative measures of the dependent variable and various econometric techniques.•The influence of macroeconomic uncertainties on bank stability is contingent upon bank characteristics and the level of financial openness in each country. This research examines the effect of economic uncertainties on bank stability in ASEAN-8 countries. We use estimations with fixed effects for a panel dataset of bank stability, bank characteristics, banking system characteristics, and macroeconomic uncertainties from 2010 to 2020. Geopolitical risk (GPR), economic policy uncertainty (EPU), climate policy uncertainty (CPU), world pandemic uncertainty (WPU), global supply chain pressure (GSCP), and monetary policy uncertainty (MPU) are used as proxies for economic uncertainty (MU) in this research. We find that although an increase in macroeconomic uncertainties weakens bank stability, GPR is positively related to bank stability. An alternative measurement of bank stability, endogenous tests, and quantile regression corroborate our primary findings. Further analyses focus on the heterogeneous influence of macroeconomic uncertainties on bank stability with diversified bank specifics and the country's financial openness. Our paper supplies deep insights for bank managers and macro policymakers in the ASEAN region relevant to the effect of macroeconomic uncertainties on bank stability. Most crucially, experimental results from this research enrich a wealth of knowledge about the regional banking industry's stability; they are the basis for the establishment of bank strategies and macroprudential policies geared to managing the increased macro-unpredictability. This research examines the effect of economic uncertainties on bank stability in ASEAN-8 countries. We use estimations with fixed effects for a panel dataset of bank stability, bank characteristics, banking system characteristics, and macroeconomic uncertainties from 2010 to 2020. Geopolitical risk (GPR), economic policy uncertainty (EPU), climate policy uncertainty (CPU), world pandemic uncertainty (WPU), global supply chain pressure (GSCP), and monetary policy uncertainty (MPU) are used as proxies for economic uncertainty (MU) in this research. We find that although an increase in macroeconomic uncertainties weakens bank stability, GPR is positively related to bank stability. An alternative measurement of bank stability, endogenous tests, and quantile regression corroborate our primary findings. Further analyses focus on the heterogeneous influence of macroeconomic uncertainties on bank stability with diversified bank specifics and the country's financial openness. Our paper supplies deep insights for bank managers and macro policymakers in the ASEAN region relevant to the effect of macroeconomic uncertainties on bank stability. Most crucially, experimental results from this research enrich a wealth of knowledge about the regional banking industry's stability; they are the basis for the establishment of bank strategies and macroprudential policies geared to managing the increased macro-unpredictability. JEL codesC19; E32; E40