E-Governance, Competition, and Stability in Banking: The Moderating Role of Digital Financial Inclusion in a Global Shap Network Framework

The competition–stability debate in global banking is revisited by incorporating digital governance and explainable machine learning approaches. A novel Extended Institutional Quality (EIQ) index is constructed by integrating the World Governance Indicators with the UN E-Government Development Index, capturing both traditional and digital institutional dimensions. Using panel data from 65 economies over the period 2011–2022, boosting algorithms (CatBoost, XGBoost, LightGBM) combined with SHAP-based network analysis suggest that higher market concentration tends to be associated with lower stability under weaker governance conditions, while stronger institutional frameworks and digital governance are linked to mitigating or even reversing this relationship. EIQ appears to be among the most influential factors, both directly associated with banking stability and interacting with concentration-related risks. Digital financial inclusion is also found to be positively associated with resilience, particularly when complemented by stronger institutional environments. Network centrality analysis indicates notable heterogeneity between developed and developing economies, with financial development and unemployment emerging as additional relevant correlates. The study contributes by incorporating e-governance into the competition–stability framework, proposing the EIQ index, and applying explainable AI techniques to the analysis of banking stability.