INTRODUCTION

The financial system of a country consists of several financial institutions, individual enterprises, and companies that play a vital role in a country’s economic development. Most of the businesses having competition in the product market for the fulfillment of their financial needs interact with the financial market. In the situation of a growing financial market, Banks and other financial institutions are businesses whose assets and liabilities, dictatorial limitations, financial purposes, and work make them a significant topic of investigation. The analysis of bank performance needs special attention as there are different users of accounting information such as managers, customers, creditors, and government who use financial statements for making different kinds of decisions. Different types of financial ratio analysis were used for analyzing bank performance by taking data from financial statement items (Vensel et al., 2004).


This part is more significant for the economies developing with the below-developed capital marketplace (Felix Ayadi et al., 2008; Zhang et al., 2013). Financial institutions like banks play an intermediaries role between the saver and the investors. Midway role of directing funds from the surplus or savers economic party to the deficit or needed units of the economy party. This kind of important function is performed by financial institutions like banks, they play important activity because they are allocating high resources significantly in the low resources unit to get the economic efficiency between different rivalries parties, these institutions ensure that low resources are using highly effectively to get high return safely. Financial resources similar to any extra raw material is cast off in the manufacture of goods, products, and services essential by societies; thus, attractive socio-economic development and growth. The financial capitals banks practice in their day-to-day processes are mostly responsibilities from the private and public grounds. The banking sector is shown and gives a high level of safety due to its high and strict rules and regulation and under high supervision it ensures and regulation to ensure reliability and security in the subdivision (so instilling depositor and investor sureness). According to Fowowe (2008) that the fall-down & minimum growth in the development of a country is blocked due to the financial sector, that’s why when countries need development they must adopt first financial institutions. These institutions are the backbone of the economy and have the main factor of the country's economic efficiency. Financial institutions consist of different firms, which is somewhere some associations, such as banking firms, insurance firms, development institutions, money markets, and stock exchanges. Banks are one of the most regulated sectors among financial institutions and contribute much more to the building of the economy and in the development of a country. Each country has a central Bank which regulates and governs the financial system. Such as the State Bank of Pakistan, which regulates the commercial banking system in the country. Besides this the main goal of SBP is to regulate a sound monetary policy for the country, also trying to promote credit and finance in the country. SBP also serves as a Government banker, fiscal advisor, and fiscal agent. Under the state bank of Pakistan, all commercial banks work and SBP creates rules and regulations for these banks. The State Banks of Pakistan is the last resolve and clearing house for all commercial banks. Commercial banks are the most vital indicator and play an important role in the development of the economy. According to Pagano (1993) the conducted study through which he suggested and also the result shows that a country's financial intermediary influences the growth of a country to increase the rate of saving, and improve the use and allocation of efficient investment. The financial intermediaries' essential and basic are to allocate limited resources of capital efficiently by giving and offering Products and services to the Public and firms (Adeusi, 2014).

Realizing that financial dangers are something that all financial institutions confront regularly is fascinating. For instance, some risks are shared by banks and microfinance organizations that are most likely to be credit risks and liquidity hazards. According to (Jenkinson, 2008), liquidity risk refers to a scenario in which a bank would be unable to pay its loans because the creditors might make an unexpected demand for payment. This ultimately results in the hasty sale of assets, which hurts the bank's profitability (Chaplin, Emblow, & Michael, 2000). According to Lopez and Saidenberg (2000), the degree of swings in the value of derivatives and liability instruments effectively defines credit risk. The relevance of credit risk was emphasized by Drehmann, Sorensen, and Stringa (2010). Credit risk is one of the biggest hazards that banks face. According to the authors, a bank's profitability and net worth are also influenced by the overall credit quality, off-balance sheet obligations, and the book's repricing characteristics, in addition to default risks.  

But the most valuable and highly contributed to the growth is the banking sector, which highly appreciated the economy of the country. As Per to Siraj and Pillai (2012) they state when a banking sector is stable it automatically reflects the performance growth, stability, and development at a high level. The main purpose of the banking sector in every country is to work as an intermediary between the surplus units and deficit units, they link these two parties to facilitate the funds of these parties for productive reasons and thus this facilitation contributes to the growth and development of the economy. (Knapkova, 2016) describe that banks just identified the visible function of work or which they are performing such as the Management of cash related to bank and Parties, different Insurance policies, work as brokerage, and also performing credit and payment functions. All these functions are considered that it is the financial intermediary’s functions which are managing the event and transaction among different parties. In the recent decade, the banking sector is widely spread and experienced vibrant changes that affect and reshape and develop the banking sector (Johnson, 2015).

The bank's capacity to anticipate, avoid, and assess risks determines how profitable the bank will be. In light of this, Sanusi (2002) said that a growing number of banks were overstretching their present human resource capability. This has caused several issues, including a subpar credit rating system, the accumulation of subpar credit, financial crimes, etc. As a result, an increasing number of banks are in trouble and are failing under the weight of their obligations. The author also highlighted a few more variables that contribute to these repeated failures of financial institutions, including subpar management, opposing ownership effects, and various forms of insider exploitation. These factors are paired with political concerns and drawn-out legal procedures for debt recovery. 

Part 1