Banks’ Financial Stability and Macroeconomic Key Factors in GCC Countries

Abstract

Purpose: This study examines the impact of macroeconomic factors on GCC banks’ stability. As GCC countries still rely on oil export revenues to cover government expenses and perform an undiversified economy, hence, increased awareness of the financial diversifications in the GCC financial sectors is needed to contribute alongside oil sector revenues and then improve the non-oil sectors’ investments in order to eliminate the oil and macro-financial linkage that causes any changes in the oil price to impact the whole macroeconomic and financial system of the country. In this context, this research selected the most important macroeconomic factors such as GDP growth, inflation rate, exchange rate, global financial crisis period (2008/2009), oil price fluctuation, and political instability within the period from 2005 to 2020, which covers many economic and political events. Design/methodology/approach: We used panel cointegration analysis, starting with a panel unit root test and including PFMOLS and PDOLS estimations. Additionally, FGLS estimation was used due to the existence of heteroskedasticity and auto-correlation in the sample. Findings: The findings suggest that there is an adverse relationship between the inflation rate, global financial crisis (2008/2009) and oil price changes, and the financial stability of GCC Islamic and conventional banks. However, the Islamic bank is less adversely affected by a financial crisis, oil price changes, inflation rate and political instability. Originality/value: This proposed model provided better knowledge for regulators and policymakers about the external impacts on GCC banks’ stability, to commit an appropriate economic policy to help in reforming the economic and financial imbalances.

Corporate Governance and Banking Stability in the MENA Region

“…By examining historical context and empirical evidence, these studies offer valuable insights to further understand the complex interplay between macroeconomic factors and banking stability. Mabkhot and Al-Wesabi (2022) conducted an empirical study aiming to assess the influence of macroeconomic factors on the stability of banks in GCC (Gulf Cooperation Council) countries. The study selected several key macroeconomic factors as focal points for analysis, including GDP growth, inflation rate, exchange rate, the global financial crisis period (2008/2009), oil price fluctuations, and political instability.…”

Kajian Stabilitas Keuangan Bank Syariah: Pendekatan Literature Review

“…Kedua, ada eksplorasi mengenai peran perbankan Islam dalam mempromosikan stabilitas keuangan. Pendekatan berbasis agen digunakan untuk memberikan bukti empiris terkait dampak perbankan Islam terhadap stabilitas finansial (Tekdogan, O. F., & Atasoy, B. S., 2021;Eid et al, 2023;Joudar, F. et al, 2023;Mabkhot, H., & Al-Wesabi, H. A. H., 2022). Ketiga, inklusi keuangan dalam konteks bank syariah memegang peran signifikan.…”

“…Pertama, penelitian menyoroti pentingnya keberlanjutan, memahami bahwa bank syariah dapat menciptakan model yang berkelanjutan ekonomi, sosial, dan lingkungan tanpa mengorbankan kinerja keuangan atau dampak positifnya pada masyarakat (Malini, 2022). Selanjutnya, terdapat eksplorasi peran perbankan Islam dalam mempromosikan stabilitas keuangan dengan menggunakan pendekatan berbasis agen untuk memberikan bukti empiris (Tekdogan, O. F., & Atasoy, B. S., 2021;Eid et al, 2023;Joudar, F. et al, 2023;Mabkhot, H., & Al-Wesabi, H. A. H., 2022). Inklusi keuangan dalam konteks bank syariah juga mendapat perhatian, menekankan bahwa bank syariah membuka akses ke layanan keuangan dengan prinsip-prinsip keadilan dan etika (Ali et al, 2019).…”

Banking research in the GCC region and agenda for future research – A bibliometric examination

“…The GCC banking systems are highly concentrated: the top four banks account for more than 40 per cent of assets in the UAE and Bahrain, about 60 per cent of assets in Saudi Arabia, and about 70 per cent of assets in Kuwait, Qatar, and Oman (Ltaifa et al, 2018). The GCC banking sector is one of the world's largest Islamic banking markets, with a dual banking system where Islamic banks operate alongside conventional banks (Mabkhot and Al-Wesabi, 2022).…”