Should We Trust the New Basel III Liquidity Ratio? Evidence from the MENA Banking Systems

Wassim Ben Ayed and Amira Houaneb

Chapter 11 in Handbook of Banking and Finance in the MENA Region, 2024, pp 287-307 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The purpose of this chapter is to examine the role of bank liquidity in ensuring financial stability. Based on the Basel III liquidity framework guidelines, the authors calculated the NSFR for 124 banks operating in the Middle East and North Africa (MENA) region during the period 2014–2021. The findings of this study show the following: first, the NSFR has a positive impact on financial stability; second, the results highlight that non-performing loans, diversification, bank size, and the business cycle have a negative impact on stability, while the ROE and business cycle have a positive impact; and third, these results support the efforts of the Basel Committee on Banking Supervision (BCBS) in developing guidelines for the NSFR to enhance the liquidity risk management. These results will be useful for authorities and policymakers seeking to clarify the implications of adopting the liquidity requirement for banking behavior.

Keywords: MENA; Banking Sector; Business Risk; Corporate Governance; COVID-19; Cryptocurrency; Fintech; Financial Stability; Green Finance (search for similar items in EconPapers)
JEL-codes: F3 G2 G3 (search for similar items in EconPapers)
Date: 2024
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