The Impact of Oil Prices on the Banking System in the GCC

Khandelwal, Padamja; Miyajima, Ken; Santos, Andre

doi:10.5089/9781475523393.001

Cited by 33 publications

(47 citation statements)

References 11 publications

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“…He concluded that the macroeconomic crisis would worsen in Venezuela due to lack of economic adjustments in an election year and the foresee able future does not look appealing for Venezuela. Khandelwal et al (2016) studied the impact of oil prices on the banking system in the GCC (Gulf Cooperation Council) by examining the link between the oil price movement, macroeconomics and financial development in the GCC. They used a multivariate panel approach and an auto-regressive approach for the analysis and found that there existed a strong empirical evidence of feedback loops between oil price movements, bank balance sheets, and asset prices.…”

Section: Oil Price Decline and Sectoral Performancementioning

confidence: 99%

Working capital management and bank performance: empirical research of ten deposit money banks in Nigeria

Osuma

Ailemen

Osabohien

et al. 2018

Banks and Bank Systems

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Working capital management is germane for the success of the banking industry in Nigeria, especially the current state of the sector, which is engulfed with the effect of the global decline in oil price that has resulted in non-performing loans, deterioration of the bank asset quality, laying-off of staff amongst others. This is one of the reasons why the profitability of the banking sector deeply depends on the efficient management of a bank’s working capital. Therefore, the objective of this study is to examine how profitability of banks can be enhanced through the working capital management. To empirically carry out the analysis, panel data which consist of ten (10) deposit money banks in Nigeria for seven years (2010–2016) employing the panel fixed effect, panel random effect and the pooled OLS for the two models, which were used as proxies for bank profitability, which includes return on asset (ROA) and return on equity (ROE) to examine the best measure for bank profitability, with the indicators of working capital; net interest income, current ratio, profit after tax, and monetary policy rate. Results of the study showed that working capital management has a significant effect on the profitability of the selected banks and that return on asset is a better measure for bank profitability. Therefore, the study recommends that there should be a periodic review of the minimum capital base of the Nigerian deposit money banks so as to mitigate the effects of inflation and inculcate the consequence of time value of money, because the purchasing power of one (₦1) naira or one ($1) dollar today would not be sufficient to purchase what it can purchase today for tomorrow.

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Section: Oil Price Decline and Sectoral Performancementioning

confidence: 99%

Working capital management and bank performance: empirical research of ten deposit money banks in Nigeria

Osuma

Ailemen

Osabohien

et al. 2018

Banks and Bank Systems

View full text Add to dashboard Cite

show abstract

“…That means that a rise in oil price leads to higher government expenditure and a stronger fiscal position, which in turn leads to a rise in corporate profitability and strengthen the balance sheets of banks (Callen, Khandelwal, Miyajima, & Santos, 2015). Accordingly, the drop in oil revenues could be a significant risk that determines credit default, which harms banks" solvency and adversely affects the real economy (Khandelwal, Miyajima, & Santos, 2016). So, financial soundness is more affected by oil price shocks compared to the impact of just an increase in oil price.…”

Section: Literature Reviewmentioning

confidence: 99%

Capital and Liquidity Risks and Financial Stability: Pre, During and Post Financial Crisis Between Islamic and Conventional Banks in GCC Countries, in the Light of Oil Prices Decline

Al-Wesabi¹,

Yusof²

2019

IJFR

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Purpose: The main purpose of this paper is to investigate the impact of capital ratio and liquidity risks and the effects of the Global Financial Crisis (GFC) periods on financial stability of conventional and Islamic banks before, during, and after GFC in the year of 2008 five GCC countries. To examine empirically the comparison between conventional and Islamic banks based on financial stability and soundness, as well as capitalization and liquidity in the light of the adverse effects of GFC and oil prices declining during the period of (2000-2017).Design/methodology/approach: By using time series data, this study employs Pedroni’s panel cointegration analysis to test the long run relationship between financial stability of conventional banks and Islamic banks as a dependent variable and independent variables including financial crisis under three periods; pre (2006-2007), during (2008-2009) and post (2010-2011) crisis. As well as employing Generalized Least Squares (GLS) to examine the effects between independent variables which are GDP, inflation, financial crisis periods, oil prices fluctuations risk, banking competition, financial sector development, liquidity risk and capital adequacy ratio and dependent variable which is financial stability of conventional and Islamic banks in GCC countries before (2000-2006) during (2006-2009) and after (2010-2017) crisis.Findings: The findings of this research suggest that there is a long run relationship between financial stability of conventional and Islamic banks and capital ratios, liquidity risk and other independent variables. As well as study’s findings support some previous studies and it generally concludes that Islamic banks were performed better during the crisis than conventional banks. Whereas Islamic banks were more stable during crisis as their business model helped to limit the adverse effects of crisis in 2008, they were also more capitalized and less exposure to liquidity risk. Nevertheless, decrease in Islamic banks’ liquidity led some Islamic banks in GCC countries to declare significant losses in 2009.Originality/value: The result of the study contributes towards understanding the determinants of financial stability of both Islamic banks and conventional banks during financial crisis periods. It is important for policy ramifications by the Central Banks in GCC in terms of treating both types of banks differently to mitigate against future financial crises.

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“…As reported by International Monetary Fund (IMF) (2015) there is a link between economic growth and revenues of oil exports which means that a rise in oil price leads to a more significant government expenditure and a stronger fiscal position which in turn leads to a rise in corporate profitability and strengthen the balance sheets of banks (Callen, Khandelwal, Miyajima, & Santos, 2015). Accordingly, the dropping in oil revenue could be a significant risk that determines credit default, which harms banks" solvency and adversely affects the real economy (Khandelwal, Miyajima, & Santos, 2016). So, financial soundness is more affected by oil price shocks compared to the impact of just an increase in oil price.…”

Section: Literature Reviewmentioning

confidence: 99%

Does Financial Instability of Conventional Banks Affect Financial Stability of Islamic Banks in GCC Countries?

Al-Wesabi¹,

Yusof²

2019

IJFR

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Purpose: The main purpose of this paper is to investigate the relationship between financial stability in Islamic banks and financial stability and soundness in conventional banks for five GCC countries.Design/methodology/approach: By using time series data, this study employs Pedroni’s panel cointegration to test the long-run relationship between financial stability of Islamic banks and financial stability of conventional banks in GCC countries during the period of (2000-2017). Besides, the study also employs Granger causality to test the causal link between stability of two types of banks (Islamic and Conventional). As well as employing Generalized Least Squares (GLS) to examine the effects between independent variables which are financial stability of conventional banks and their profitability, impact of period of financial crisis (2008/2009), oil prices fluctuations, banking concentration and financial sector development and financial stability of Islamic banks (as the dependent variable).Findings: The findings of this research suggest that there is a long-run, significant and positive relationship between the financial stability of conventional banks and its Islamic counterpart. At the same time, the financial stability of conventional banks is found to Granger caused the stability of Islamic banks.Originality/value: The results of the study contribute towards understanding the determinants of the financial stability of both Islamic banks and conventional banks and how they affect each other. This is important for policy ramifications by the Central Banks in GCC in terms of treating both types of banks differently to mitigate against future financial crises.

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The Impact of Oil Prices on the Banking System in the GCC

Cited by 33 publications

References 11 publications

Working capital management and bank performance: empirical research of ten deposit money banks in Nigeria

Working capital management and bank performance: empirical research of ten deposit money banks in Nigeria

Capital and Liquidity Risks and Financial Stability: Pre, During and Post Financial Crisis Between Islamic and Conventional Banks in GCC Countries, in the Light of Oil Prices Decline

Does Financial Instability of Conventional Banks Affect Financial Stability of Islamic Banks in GCC Countries?

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