This study examines the influence of bank-specific variables on the individual risk of 58 banks in ten MENA countries over the period 2011-2019. Firstly, investigating the correlations among the banks’ stock returns depicts that the banks with the highest correlations are in Saudi Arabia, the United Arab Emirates, and Qatar, either domestically or across countries. Then, the individual bank risk ranking for the entire sample based on estimated historical Value-at-Risk (VaR) and Estimated Shortfall (ES) shows that the corresponding positions of banks according to their riskiness differ slightly. Noticeably, the National Bank of Fujairah in the United Arab Emirates has the highest idiosyncratic risk level in terms of both risk measures. We lastly conducted fixed and random effects panel regression models to examine the impact of bank-specific balance sheet data and macroeconomic variables on bank risk levels captured by VaR and ES. The whole sample comprises publicly listed banks in 10 countries, which were further divided into 2 sub-samples for the Gulf Cooperation Council (GCC) region and Mediterranean Partner Countries (MPCs). The outcomes of the aggregate sample suggest that lower leverage, profitability, and economic growth may exacerbate idiosyncratic risk. Results also demonstrate that strengthening stability and regulatory capital positions would lower banking risk. Considering the GCC sub-sample for VaR and ES models, we found that both risk measures typically increase with greater liquidity.

This study examines the impact of bank-specific and macroeconomic variables on bank risk measures proxied by solvency risk (Z-score) and credit risk (NPLs). Fixed and random effects panel regression models are adopted the generalized method of moments (GMM) dynamic technique for 138 banks in 12 MENA countries (2005-2022). Which is further sub-divided into two groups, namely GCC and MPC for comparative analysis to reveal differences in terms of importance of risk determinants. The results indicate mainly that leverage raises both solvency and credit risks. An increase in income diversability reduces solvency risk and a larger bank size mitigates credit risk. Moreover, economic growth significantly reduces solvency risk but inflation erodes bank financial stability. Regarding the GCC, there is a positive relationship between size and solvency risk. Also, economic growth enhances credit quality while liquidity worsens this portfolio. Considering the MPC sample, leverage is the most important factor raising credit risk. Profitability has a positive effect on Z-score, thereby lowers solvency risk. These findings suggest that banks in the MENA region can enhance their stability by focusing on improving profitability and operational efficiency while managing leverage levels. Policymakers may also consider fostering economic growth to support banking sector stability.