Can Gulf Banks Pass the CCAR Stress Tests?

Mahmoud Haddad () and Sam Hakim ()
Additional contact information
Mahmoud Haddad: University of Tennessee-Martin, Martin

No 1032, Working Papers from Economic Research Forum

Abstract: The absence of a uniform standard for stress tests is a key challenge today for Central Banks in the Gulf. This paper utilizes the Dodd-Frank 2010 Comprehensive Capital Analysis and Review (CCAR) stress test to assess the balance sheets of 3 of the largest 10 banks in the GCC countries. To our knowledge, this is the first study in the literature that evaluates banks in the region across the (CCAR) stress test scenarios. We follow a top-down approach using a VAR model and measure the impact of macro-economic and financial indicators on the capital ratio, loan loss provision, and a bank’s ROA. The results are then used to project these variables using 3 sets of scenarios currently performed by the large banks in the US, mandated by the Federal Reserve System. Our results show that Riyad Bank and Qatar National Bank pass the most severe scenarios, but the National Bank of Kuwait fails both stress scenarios, potentially falling out of compliance with the Basle II requirements. The implications suggest that while the capital of the Gulf region largest banks is above regulatory requirements during normal conditions, the situation could change dramatically in stressed environments.

Pages: 19
Date: 2016-08, Revised 2016-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published by The Economic Research Forum (ERF)

Downloads: (external link)
http://erf.org.eg/wp-content/uploads/2016/08/1032.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://erf.org.eg/wp-content/uploads/2016/08/1032.pdf [301 Moved Permanently]--> https://erf.org.eg/wp-content/uploads/2016/08/1032.pdf)
http://bit.ly/2aPYY7m

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:1032

Access Statistics for this paper

More papers in Working Papers from Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Namees Nabeel ().