Abstract Banking is a highly regulated industry. The purpose of banking regulation is to ascertain that banking system is stable and sustainable. Banking stability is important because most of people have been transacted with banks not only by depositing money but also closely linked with other activities such as drawing salaries (payroll), paying bills, buying home, investing and borrowing loans. That is why we need banks to interact among other businessmen or customers. We have witnessed that if a bank is disrupted as a result of significant adverse, unforeseen events or by bad reputation, it will spread easily to other banks or even banking sector as a whole. The World Bank has defined a stable financial system is capable of efficiently allocating resources, assessing and managing financial risks, maintaining employment levels close to the economy ’s natural rate, and eliminating relative price movements of real or financial assets that will affect monetary stability or
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