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Is the MENA banking sector competitive?

Journal of Banking Regulation volume 20, pages 124–135 (2019)Cite this article

Abstract

The purpose of this paper is to investigate the competitive conditions and revenue drivers of commercial banks in the MENA region in the context of Panzar–Rosse model. It is the first study of its kind that examines a large sample of MENA banks for an extensive period (1999–2012) during an era of political and economic unrest and transformation that includes the global financial crisis (2007–2009). Panel data analysis using fixed effects was employed in order to examine whether the competitive conditions in MENA banks is explained by monopoly, monopolistic competition or perfect competition. Findings show that MENA banks operate under monopolistic competition, and bank-specific variables show a positive impact on revenue. These findings indicate that policymakers should relax capital adequacy requirements to guarantee the stability of the financial system. They also raise a concern that commercial banks in the MENA economies tend to concentrate on traditional lending activities, where their competitive position may be eroded in the long run by the decreasing state role of Islamic banks and by mergers that are not empirically justified for MENA banks during this period.

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Notes

  1. Current developing and emerging countries are expected to account for nearly 57% of world GDP by 2030.

  2. Bikker et al. [8] examined only two MENA region countries during 1994–2004, while Turk-Ariss [7] examined MENA banking systems over the period 2000–2006; however, none of these studies examined ownership issues.

  3. We examined these bank-level factors as suggested and used, inter alia, in Molyneux et al. [9], and Mamatzakis et al. [10] that examined them in other markets.

  4. GCC consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

  5. In the current study, as a result of a lack of data regarding the number of employees, we use the ratio of staff expenses to total assets as a proxy, as in Molyneux et al. [9], and Hauner and Peiris [29].

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Author information

Authors and Affiliations

  1. University of East London, London, E15 4LZ, UK

    Hatem Elfeituri

  2. University of Benghazi, Tripoli road, Benghazi, Libya

    Hatem Elfeituri

  3. Portsmouth Business School, University of Portsmouth, Richmond Building Portland Street, Portsmouth, PO1 3DE, UK

    Konstantinos Vergos

Authors
  1. Hatem Elfeituri
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  2. Konstantinos Vergos
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Correspondence to Hatem Elfeituri.

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Elfeituri, H., Vergos, K. Is the MENA banking sector competitive?. J Bank Regul 20, 124–135 (2019). https://doi.org/10.1057/s41261-018-0072-5

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  • DOI: https://doi.org/10.1057/s41261-018-0072-5

Keywords

  • Panzer and Rosse
  • Competition
  • Revenues
  • Deregulation
  • MENA

JEL Classification

  • G21
  • F30
  • G20