Macro-prudential procedure, Covid-19 pandemic and banking performance in the middle east and North Africa countries

The coronavirus pandemic's economic quagmire raises the possibility of a second banking crisis. This converges with the tightened banking regulatory regime seen in the course of the last decade and the emergence of new sources of revenue diversification that seriously interrogate the long-established business model. Needless to reiterate, more studies are required to test these claims. Thus, the present study confronts a cardinal research problem that has potentially far-reaching policy implications. The central question concerns the potential effects of higher liquidity (NSFR), contingent convertible capital (COCO bonds), revenue diversification (non-interest income), and the performance during the coronavirus pandemic. The study was performed using a sample of banks from (MENA) region with balanced panel data spanning the period from 2011 to 2020. The analysis incorporates various econometric estimations, such as system GMM, dynamic panel threshold, and quantile regression. Findings indicate that more COCO bonds will improve bank performance. Interestingly, Bank performance exhibits an inverse correlation with COCO bonds when they interact with liquidity, suggesting that the combination of liquidity and capital reduces bank performance. However, this relationship is only observed during the pandemic. Additionally, bank performance is positively related to funding liquidity. Furthermore, estimates from a dynamic GMM and a dynamic panel threshold regression show that NSFR will decrease bank performance during a pandemic. Finally, our findings show that during the COVID pandemic, higher numbers of revenue diversification lessened bank performance below the threshold and in the lower quantiles. Further, this impact increases above the threshold and in the upper quantiles. Notably, the findings are robust to alternative estimations and different measures as well. The study recommends that regulators in the MENA region prohibit banks from participating in non-interest- generating activities, particularly during the coronavirus closure. Future research could examine the potential mediating and moderating impacts of Basel III standards, particularly the countercyclical capital buffer, on revenue diversification and bank performance.

Text 125308 - Full Text.pdf Download (1MB) Text SPE 2023 25 - Declaration Form.pdf Restricted to Repository staff only Download (341kB) Text SPE 2023 25 - Full Text.pdf Restricted to Repository staff only Download (1MB) Official URL or Download Paper: http://ethesis.upm.edu.my/id/eprint/18846

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