| This study aims to determine the factors that most influence the financial distress of the Indonesian banking sector in 2003-2013 by using multivariate logit econometric model. In addition, this study also aims to offer a new approach for identifying financial distress in the system-wide level. To determine the factors that most influence the financial distress of the Indonesian banking sector, researchers used four macroeconomic variables, namely GDP growth, real interest rate, inflation rate, and the ratio of the money supply M2 to foreign exchange reserves. Research is conducted from testing the indicators, estimating models, exploring the influence of indicators, and testing the performance of the model using the Quadratic Probability Score (QPS) and Log Probability Score (LPS). To identify financial distress at system-wide level, Reseacher uses a financial Market Pressure Index, which uses variables in the aggregate banking financial ratios namely CAR, NPL, ROA, and LDR. The results show financial distress of the banking sector is likely to increase when macroeconomic conditions deteriorate, in particular, low GDP growth. Also found that the balance of payment Indonesia is vulnerable to financial distress characterized by the flow of capital out of the country any financial distress occurs. The results also show that the identification of financial distress at the system-wide level use of financial Market Pressure Index captures the signal from the pressure of the financial sector until the recovery phase even financial condition after the crisis. |