Bank Performance

Question:

Write an essay on Performance of the banks in the MENA region during the time of the financial crisis.

Answer:

The region of MENA is a combination of 28 countries with a population of `357.3 million people. There has been rapid growth and increasing relevance of the region in the world economy (Claessens andVan Horen, 2013). This region helps in connecting Asia and Europe and is one of the oil producing regions in the world.  The region has maximum number of Islamic banks operating as it is the home for majority Muslim population (Rosman, Wahab and Zainol 2014). Globalisation has caused the foreign banks to enter the market. The financial crisis has different aspect on the domestic and foreign banks. This paper will help in the evaluating the performance of the banks during the financial crisis in the MENA region.

Problem statement: 

 The problem statement involves the effect of global financial crisis on the performance of the banks in the region of MENA

Gap in the research: 

The problem discussed in the past literatures involves the efficiency and performance of banking in the entire region of MENA and the impact of the different type of the ownership but there was no analysis on the global financial crisis impact on the bank performance in the region of MENA. This gap is to be resolved in the report.

Outline of the paper: 

The outline of the paper involves Section 1 is the introduction , Section 2 gives the literature  revie, Section 3 defines the methodology used , Section 4 is  the empirical results and  Section 5 would involve concluding remarks

Methodology: 

Research Question:

The following are the research question involved:

What are the factors that help in foreign banks to enter the market?

What is the effect foreign banks’ entry on the host nation?

What are the entry modes of the foreign banks?

What is the effect of financial crisis on bank performance?

What are the factors that affect the profitability of the bank?

Hypothesis:

The hypothesis for the following research:

H0:  There is an effect of the global financial crisis on the bank’s performance in MENA region.

H1:  There is no effect of the global financial crisis on the bank’s performance in MENA region.

Data collection and Analysis:

To understand the internal features of the banks, information is collected database of Bankscope.  The macroeconomic variables are collected from the database of the World Bank. The period taken for analysis is 2000-2012 (Supino and Borer 2012).  The data set will be including 76 foreign banks and 46 domestic banks of 17 MENA countries. A secondary analysis is performed on the research topic.

There are two accounting measures used for assessing the performance of the banks i.e. the return on average equity (ROAE) and return on average assets (ROAA). The multivariate regression analysis is performed the return on the average assets is used for measuring the profitability of the banks (6 and Bellamy 2012).  Profitability of the bank is the dependent factor.

Descriptive statistics is performed for the for the macro variable and the internal characteristics of the banks  operating in the MENA region of the country’s 2000-2012.

Time Span:

The time taken for performing the analysis  is as follows:

The research project will take 7 weeks to complete. In the first week, the topic is selected. In the second and the third week, the literature review is done on the selected topic. During the 3rd week the focus is on the methodology to be used.  In the 4th and the 5th week, the data is a collected and analysed. The finding would be done in the 6th week. Finally, in the 7th week, conclusion and submission of the assignment will be done.

Rationale to use the selected methodology:

The secondary method will be used for performing the analysis, as the data is available conveniently in the different database like the World Bank and Bankscope.

Preliminary result and policy implication

The preliminary result suggests the banks performed poorly than that of the developed countries. There is likely to be no relationship with ROAE and ROAA. There is likely to have a weak correlation with ROAE and ROAA. The macro variables will have a positive correlation between ROAA and ROAE. There is likely to have a positive and significant affect of net interest revenue on the profitability. The coefficient estimated on GDP if positive shows that the foreign banks would be affected by the entry in the developing countries. Internal characteristics of the banks are statistically significant. The domestic bank has outperformed the foreign banks during the time of the global crisis. 

Reference

6, P. and Bellamy, C. (2012). Principles of methodology. London: SAGE.

Claessens, S., andVan Horen, N. (2013). Impact of foreign banks.

Rosman, R., Wahab, N. A., and Zainol, Z. (2014). Efficiency of Islamic banks during the financial crisis: An analysis of Middle Eastern and Asian countries. Pacific-Basin Finance Journal, 28, 76-90.

Supino, P. and Borer, J. (2012). Principles of research methodology. New York, NY: Springer.

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