This study aims to investigate the impact of banking-sector concentration on the banks’ liquidity creation in GCC countries over the period from 2012 to 2018 by using a dynamic GMM panel procedure. The results suggest that increased bank competition reduces banks’ liquidity creation across the GCC countries. The study’s findings are in line with the ‘financial fragility hypothesis” according to which banks to reduce their lending activities when competition is high in the market. The evidence suggests that the banking industry is different from others, and pro-competitive policies in the banking industry can reduce liquidity provision by banks. In the context of policy implications, a concentrated banking system discourages capital provision to firms; hence, regulators have to take appropriate measures to resolve the problem of a reduced supply of capital. Government must regulate the banking sector by keeping in view their long-run goal as competition is a double-edged sword in banking.

This study aims to examine the impact of different capital ratios on Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets by studying large commercial banks of the United States. The study employed a two-step system generalized method of movement (GMM) approach by collecting the data over the period ranging from 2002 to 2018. The study finds that using Non-Performing loans and Loan Loss Reserves as a proxy for risk, results support moral hazard hypothesis theory, whereas the results support regulatory hypothesis theory when Risk-Weighted Assets is used as a proxy for risk. The results confirm that the influence of high-quality capital on Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets is substantial. The distinctive signs of Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets have indications for policymakers. The results are intimate for formulating new guidelines regarding risk mitigation to recognize Non-Performing loans and Loan Loss Reserves and the Risk-Weighted Assets for better results. JEL Classification: G21, G28, G29