Systemic Risk and Commercial Bank Stability in the Middle East and North Africa (MENA) Region

Rim Jalloul () and Mahfuzul Haque
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Rim Jalloul: Laboratory for Studies and Research in Management Sciences (LERSG), Faculty of Legal, Economic and Social Sciences, Agdal, Mohammed V University, Rabat 10000, Morocco
Mahfuzul Haque: Scott College of Business, Indiana State University, Terre Haute, IN 47809, USA

Risks, 2025, vol. 13, issue 7, 1-18

Abstract: Using panel data spanning 2004–2023 of 21 countries in the MENA (Middle East and North Africa) region, we measure systemic risk and assess its influence on key banking sector performance indicators, including financial stability (proxied by commercial bank branches per 100,000 adults), providing evidence from the emerging market context. One of the key findings of the study is the pivotal role played by financial access in promoting banking stability. In particular, the density and outreach of commercial banking branches were shown to have a stabilizing effect on the banking system. Also, findings reveal that systemic risk significantly undermines bank stability and operational efficiency while constraining financial depth. The study contributes to the literature by offering empirical evidence on the adverse effects of systemic risk in a region characterized by financial volatility and structural vulnerabilities. These findings align with existing global evidence that links financial development with reduced systemic risk, yet they also offer new empirical insights that are contextually relevant to the MENA region. The findings provide actionable recommendations for policymakers. Regulatory authorities in the MENA region should consider strategies that not only enhance the robustness of financial institutions but also promote inclusive access to banking services. The dual focus on institutional soundness and outreach could serve as a cornerstone for sustainable financial stability. Tailored policies that encourage branch expansion in underserved areas, coupled with incentives for inclusive banking practices, may yield long-term benefits by reducing the concentration of risk and improving the responsiveness of the financial system to external shocks.

Keywords: systemic risk; financial stability; commercial banks; MENA region; financial resilience; panel vector autoregression (PVAR) (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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