Measuring and analyzing some determinants of financial depth in the Iraqi banking sector

Abstract

Financial depth is a core concept in financial and banking economics, as it reflects the banking system's ability to expand the provision of financial services and enhance its efficiency in mobilising and optimally utilising resources. The importance of studying the determinants of financial depth in Iraq arises from the economic and financial challenges facing the banking sector, which necessitate identifying the key factors that strengthen its stability and profitability. This research aims to measure and analyze some determinants of financial depth in the Iraqi banking sector, focusing on financial size, liquidity, flexibility of the asset–liability structure, and income diversification. The study adopted both the descriptive–analytical approach and the applied quantitative method, employing financial analysis tools to extract results. The findings indicate that larger financial size contributes to higher profitability levels (ROA and ROE), while higher liquidity reduces risks and increases customer confidence, thereby supporting financial stability. Furthermore, flexibility in the asset–liability structure is positively associated with operational efficiency and enhances banks’ adaptability to economic changes, whereas income diversification provides greater stability and improved profitability. The study concludes with several recommendations, the most important of which is strengthening financial inclusion by expanding electronic payment networks and adopting mobile banking solutions, as these measures have a direct impact on deepening financial activity and achieving stability and profitability in the Iraqi banking sector