The Effect of Credit Risk and Liquidity of Exchange Contracts on the Stability of Iran’s Banking System

The banking system, both Islamic and conventional banking, faces many risks, one of the most important of which is credit risk and liquidity.In Iran's Islamic banking system, facilities in the form of loan contracts, exchange, partnership and investment is granted.The interest rate of exchange contracts is determined by the central bank and it is fixed.In this research, the credit risk and liquidity of exchange contracts on the stability of Iran's banking system have been investigated.Therefore, the financial information of 24 bank during the period of 1390-1397 have been analyzed using the econometric method of structural equation.Also to examine the bank stability variable from two indicators z-score and merton distance to default have been used.Based on the results obtained from both indicators, credit risk variable has the most positive effect and asset growth variable has the least positive effect on the stability of iran's banking system.The impact of liquidity risk variable is also positive on the stability of iran's banking system.Also, the effect of the inefficiency ratio variable on banking system is not significiant.