Capital regulation, competition and risk-taking: Policy implications for banking sector stability in the MENA region

2022 ◽  
Vol 60 ◽  
pp. 101579
Author(s):  
Miroslav Mateev ◽  
Syed Moudud-Ul-Huq ◽  
Ahmad Sahyouni ◽  
Muhammad Usman Tariq
Keyword(s):  
Risk Taking ◽  
Banking Sector ◽  
Policy Implications ◽  
Capital Regulation ◽  
Mena Region

scholarly journals Competition, capital growth and risk-taking in emerging markets: Policy implications for banking sector stability during COVID-19 pandemic

PLoS ONE ◽  
2021 ◽  
Vol 16 (6) ◽  
pp. e0253803
Author(s):  
Miroslav Mateev ◽  
Muhammad Usman Tariq ◽  
Ahmad Sahyouni
Keyword(s):  
Risk Taking ◽  
Financial Stability ◽  
Banking Sector ◽  
Institutional Environment ◽  
Positive Impact ◽  
Capital Requirements ◽  
Policy Implications ◽  
Mena Region ◽  
Banking Competition ◽  
Capital Ratios

This paper investigates how banking competition and capital level impact on the risk-taking behavior of banking institutions in the Middle East and North Africa (MENA) region. The topic is perceived to be of significant importance during the COVID-19 pandemic. We use data for more than 225 banks in 18 countries in the MENA region to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between Islamic and conventional banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. We also provide evidence that banks in the MENA region increase their capitalization levels in response to a higher risk and vice versa. Further, banking concentration (measured by the HH-index) and credit risk have a significant and positive impact on capital ratios of IBs, whereas competition does play a restrictive role in determining the level of their capital. The results hold when controlling for ownership structure, regulatory and institutional environment, bank-specific and macroeconomic characteristics. Our findings inform regulatory authorities concerned with improving the financial stability of banking sector in the MENA region to strengthen their policies in order to force banks to better align with capital requirements and risk during the COVID-19 pandemic.

scholarly journals The Impact of Regulatory Capital on Risk Taking By Pakistani Banks

2019 ◽  
Vol 2 (2) ◽  
pp. 94-103 ◽  
Author(s):  
Muhammad Sajjad Hussain ◽  
Dr. Muhammad Muhaizam Musa ◽  
Dr. Abdelnaser Omran
Keyword(s):  
Developing Countries ◽  
Risk Taking ◽  
Implementation Process ◽  
Policy Implications ◽  
Capital Regulation ◽  
Regulatory Capital ◽  
Minimum Capital ◽  
Capital Ratios ◽  
Capital Regulations ◽  
The Impact

Objective - The objective of this study is to examine the relationship between capital regulation and risk-taking by the banks of Pakistan.  Design - This study was conducted on all the commercial banks of Pakistan and data were collected from the year 2005 to 2016.  Findings - This study concluded the significant positive relationship between regulatory capital and risk-taking by banks in Pakistan. The findings of this study play a key role in the implementation of capital regulations in the banks of developing countries.  Policy Implications - In the light of this study, the regulators must revise their implementation process of the Basel Accord capital regulations in the banks of developing countries. The prime intention of regulators are only on to maintain the minimum capital ratios but must be conscious of other important elements of capital regulation implications.  Originality - This study is one of the first attempts that investigated the crucial role of regulatory capital towards risk-taking in the Pakistani context.

scholarly journals Capital Regulation and Risk-taking Behavior: Empirical Evidence for Islamic Banks

2022 ◽  
Vol 12 (1) ◽  
pp. 43-50
Author(s):  
Yomna Daoud ◽  
Aida Kammoun
Keyword(s):  
Empirical Evidence ◽  
Risk Taking ◽  
Banking Sector ◽  
Theoretical Background ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Islamic Banks ◽  
Conventional Banks ◽  
The Relationship

This paper investigates whether regulatory pressures have an impact on the relationship between change in capital and bank risk-taking. On the basis of a well developed theoretical background, capital regulation constitutes the core of prudential regulation within the banking sector. Several researches have investigated this relationship between capital and risk in conventional banks, and this subject has gained in interest since the last financial crisis. This study is one of the few studies that have attempted to provide empirical evidence on this issue for Islamic banks. We use data of Islamic banking sectors over the period 2010–2014. The results reveal that Islamic banks tend to behave differently at each level of capital adequacy. In addition, we provide some evidence that change in capital is positively related to the change in risk for highly capitalized Islamic banks.

Capital Regulation and Market Competition in the MENA Region: Policy Implications for Banking Sector Stability During COVID-19 Pandemic

2021 ◽  
pp. 097215092110644
Author(s):  
Miroslav Mateev ◽  
Syed Moudud-Ul-Huq ◽  
Tarek Nasr
Keyword(s):  
Credit Risk ◽  
Market Power ◽  
Banking Sector ◽  
Market Competition ◽  
Capital Requirements ◽  
Capital Regulation ◽  
Islamic Banks ◽  
Mena Region ◽  
Conventional Banks ◽  
The Relationship

This article investigates the impact of capital requirements and market competition on the stability of financial institutions in the Middle East and North African (MENA) region. We test the hypothesis that capital requirements significantly affect the risk behaviour of both Islamic and conventional banks in the MENA region. We also investigate the moderating effect of market power and concentration on the relationship between capital regulation and bank risk. We find that capital ratio has a strong positive impact on conventional banks’ credit risk, whereas this effect is insignificant in the sample of Islamic banks. Our analysis indicates that, for the conventional banking sector, the increase in the capitalization level is negatively linked to bank credit risk only when banks’ level of market power is high. Regarding the Islamic banks’ behaviour, we find that the relationship between capital and credit risk is weakly moderated by banking competition. This means that Islamic banks are less sensitive to the market’s competitive conditions in the MENA countries, as they still apply their theoretical models, based on prohibition of interest. Our findings inform regulatory authorities concerned with improving the banking sector’s financial stability in the MENA region to strengthen their policies and force banks to better align with regulatory capital requirements during the COVID-19 pandemic.

Same Story, Different Place?

2018 ◽  
Author(s):  
Viral V. Acharya ◽  
Tim Eisert ◽  
Christian Eufinger ◽  
Christian Hirsch
Keyword(s):  
Banking Sector ◽  
Debt Crisis ◽  
Banking System ◽  
Policy Implications ◽  
Balance Sheets ◽  
System P ◽  
Loan Supply ◽  
European Banking ◽  
European Debt Crisis

This chapter compares the recapitalizations of the Japanese banking sector in the 1990s with those in the ongoing European debt crisis. The analysis points to four main policy implications. First, recapitalizing banks by insuring or purchasing troubled assets alone is not likely to solve the problem of banks’ weak capitalization, as this measure is not able to adjust the extent of the recapitalization to the banks’ specific needs. Second, the amount of the recapitalization should be based on actual capital shortages and not risk-weighted assets to avoid banks decreasing their loan supply. Third, banks should face restrictions regarding the amount of dividends they are allowed to pay out. Finally, banks must be induced to clean up their balance sheets and reduce the amount of bad (non-performing) loans to rebuild confidence in the European banking system.

Assessing the bank profitability in the MENA region

2014 ◽  
Vol 7 (3) ◽  
pp. 305-332 ◽  
Author(s):  
Rim Ben Selma Mokni ◽  
Houssem Rachdi
Keyword(s):  
Method Of Moments ◽  
North Africa ◽  
Banking Sector ◽  
Middle Eastern ◽  
Generalized Method Of Moments ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Conventional Banks ◽  
Econometric Technique

Purpose – Which of the banking stream is relatively more profitable in Middle Eastern and North Africa (MENA) region? Design/methodology/approach – The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009.The authors estimate models using the generalized method of moments in system, of Blundell and Bond (1998). They exploit an up-to-date econometric technique which takes into consideration the issue of endogeneity of regressors to evaluate the comparative profitability of Islamic and conventional banks in the MENA region. Findings – Empirical analysis results show that the determinants’ significance varies between Islamic and conventional banks. Profitability seems to be quite persistent in the MENA region reflecting a higher degree of government intervention and may signal barriers to competition. Originality/value – The main interest is to develop a comprehensive model that integrates macroeconomic, industry-specific and bank-specific determinants. The paper makes comparison of the performance between two different banking systems in the MENA region. The authors consider a variable crisis to gain additional insights into the impacts of the financial crisis on MENA banking sector.

scholarly journals Banking Sector Development, Inflation and Economic Growth in Asian Countries: A Panel Causality and Co-Integration Approach

2018 ◽  
Vol 8 (4) ◽  
pp. 384
Author(s):  
Muhammad Imran Nazir ◽  
Rehana Tabassam ◽  
Ifran Khan ◽  
Muhammad Rizwan Nazir
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Vital Role ◽  
Least Square ◽  
Policy Implications ◽  
Asian Countries ◽  
Ordinary Least Square ◽  
Long Run ◽  
Banking Sector Development ◽  
Integration Test

This study investigates the causal relationship between banking sector development, inflation, and economic growth for six Asian countries (Bangladesh, China, India, Malaysia, Pakistan and Sri Lanka) over the period of 1970-2016. Using a Pedroni panel, Kao co-integration test, Panel Granger causality-based Error Correction Model, Dynamic ordinary least square (DOLS), and Fully modified ordinary least square (FMOLS), this study finds that the development of the banking sector generally has a positive relationship with economic growth in the long-run. This results show that in the long-run, monetary policy play a vital role in the economic growth. This study also confirmed the response causality between the indicators of banking sector development and economic growth. Based on the empirical findings, this research provides important policy implications to the banking sector and economic supervisory bodies in order to achieve the long run economic growth.

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