Banking Competition, Efficiency and Stability in the MENA Region

Abstract

The intensification of competition in the banking market following the adoption of financial liberalisation and deregulation policies all over the world has raised questions about their impact on the stability of the banking sectors. This study aims at participating in the continuous debate on how the competition conditions in the market affects the stability of banks in the MENA region. This study exploits a sample of 216 MENA banks operating over the period 1999-2019, and adopts the GMM method to detect the association between banking competition and stability. The empirical results show that market power has a negative effect on banking stability. This result has implications suggesting that the adverse effect of concentration on banking stability implies that regulators should be careful in pushing/encouraging banks consolidate, as this may reduce stability.