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

PloS one, 2021-06, Vol.16 (6), p.e0253803-e0253803 [Peer Reviewed Journal]

COPYRIGHT 2021 Public Library of Science ;2021 Mateev et al. This is an open access article distributed under the terms of the Creative Commons Attribution License: http://creativecommons.org/licenses/by/4.0/ (the “License”), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;2021 Mateev et al 2021 Mateev et al ;ISSN: 1932-6203 ;EISSN: 1932-6203 ;DOI: 10.1371/journal.pone.0253803 ;PMID: 34166479

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Title:
Competition, capital growth and risk-taking in emerging markets: Policy implications for banking sector stability during COVID-19 pandemic
Author: Mateev, Miroslav ; Tariq, Muhammad Usman ; Sahyouni, Ahmad
Gherghina, Stefan Cristian
Subjects: Africa, Northern - epidemiology ; Bank capital ; Banking ; Banking industry ; Banking, Personal - economics ; Banks ; Capital requirements ; Competition ; Coronaviruses ; COVID-19 ; COVID-19 - economics ; COVID-19 - epidemiology ; Credit risk ; Economic aspects ; Economic crisis ; Efficiency ; Emerging markets ; Employment ; Evaluation ; Humans ; Hypotheses ; Interest rates ; Islamic financing ; Medical research ; Medicine and Health Sciences ; Models, Economic ; Monopolistic competition ; Pandemics ; Pandemics - economics ; People and Places ; Regulation of financial institutions ; Regulatory agencies ; Risk ; Risk assessment ; Risk taking ; SARS-CoV-2 ; Social Sciences ; Stability ; Stock exchanges
Is Part Of: PloS one, 2021-06, Vol.16 (6), p.e0253803-e0253803
Description: 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.
Publisher: United States: Public Library of Science
Language: English
Identifier: ISSN: 1932-6203
EISSN: 1932-6203
DOI: 10.1371/journal.pone.0253803
PMID: 34166479
Source: PLoS (Open access)
Geneva Foundation Free Medical Journals at publisher websites
DOAJ Open Access Journals
MEDLINE
PubMed Central
Coronavirus Research Database
ProQuest Central

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

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