PurposeThe introduction of Basel capital adequacy standards (I, II and III) has provoked a large body of empirical and theoretical literature that aimed to detect the consequences of risk-based capital rules on bank lending behaviour and credit availability (and the possible emergence of the credit crunch phenomenon), and came up with divergent conclusions. This study aims at participating in this continuous debate but detecting the applicability of the credit crunch theory in the MENA region, taking into consideration the impact of the institutional environment, which may play a role in mitigating the supply-side credit crunch.Design/methodology/approachThis study exploits the Fixed Effects method on a dataset of 210 banks from 14 MENA countries over the period 1999–2016. The paper exploits the percentage change in bank credit as a dependent variable, capital requirements and three institutional quality variables as explanatory variables, in addition to a set of micro- and macro-economic variables.FindingsThe study finds that the implementation of higher capitalisation ratios does participate in a significant decline in bank credit supply. Additionally, by testing the impact of institutional factors on bank lending, it reveals that good governance and political stability encourage banks to extend credit and soften the credit crunch, while higher level of financial freedom discourages banks from expanding loan supply and even magnifies the decline of credit following tightening capital requirements.Practical implicationsThis paper provides very important insight for MENA policymakers and bank regulators by highlighting the importance of the institutional environment factors in amplifying or softening the effect of higher capital requirements in their economies.Originality/valueIn addition to examining an understudied sample of countries, this paper's originality and value added are represented mainly by testing the impact of institutional environment and governance level on bank lending behaviour.

Lebanese banks recorded an enormous increase in size, customers' base, and products variety over the past two decades, which suggests the development of economies of scale and scope in the Lebanese banking sector. This study aims at testing the presence of these economies of scale and scope in the Lebanese banking sector, particularly over the period [2000][2001][2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013]. The estimation of a translogarithmic cost function by the maximum likelihood method shows that the Lebanese banks are -in general -characterised by the existence of increasing economies of scale. The analysis of economies of scope also reveals a complementarity between different outputs. Finally, the analysis of price elasticities of demand for production factors shows an important substitutability between labour and physical capital.

PurposeThis paper focuses on the relationship between the regulatory capital requirements and the supply of credit for commercial banks that are operating in the MENA region from 1999 till 2017.Design/methodology/approachThe application of the Fixed Effects Model on a panel of commercial banks in the MENA region has shown a negative relationship between supply of credit and both the capital requirements and solvency ratios.FindingsThe results showed that the idiosyncratic, the macroeconomic and the institutional variables affect the supply of credit behavior of banks. The robustness tests using the Two-Stage Least Square method (2SLS) also led to a negative correlation between the growth of credit and capital requirements. Specific macroeconomic and institutional variables have revealed the expected sign and are significant regardless of the estimated specifications.Research limitations/implicationsThis work can be subjected to further future extensions. The explanatory power of our model can be improved by incorporating variables that reflect the corporate governance and structure of banking sector. Similarly, we can also include a variable that takes into account the increasing competition that could affect the stability of the banking sector and therefore the prudential banking regulation.Originality/valuePrevious studies that investigated only the relationship between capital level and risk-taking behavior of banks in the MENA region did not take into account neither the economic and institutional environment nor the impact of these regulations on credit (loans) supply.