## _wp13160

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### Introduction and research question
- Basel I was negotiated in 1988 to set common bank capital requirements across 12 industrial countries with the intent to promote soundness and stability of the international banking system.
- The paper investigates whether the adoption and implementation of Basel I (risk-based capital adequacy requirements) affected credit availability and banks’ portfolio allocation in a sample of MENA countries.
- Hypothesized channels:
  - Regulatory tax channel: higher risk weights increase the cost of holding riskier assets, inducing substitution out of high-risk assets (e.g., commercial loans) into less risky assets (e.g., government securities), potentially causing a “credit crunch.”
  - Competitive lending channel: more competitive banks might expand lending and charge higher interest rates to offset higher capital costs, depending on demand elasticity.
  - Supply- and demand-side constraints (liquidity, collateral requirements, high NPLs, macroeconomic demand factors) may mediate net effects on credit growth.

### Sample, scope, and data
- Geographic focus: Middle East and North Africa (MENA).
- Sample countries: Egypt, Jordan, Lebanon, Morocco, and Tunisia.
- Sample period: 1989-2004 (with some country-specific windows noted in tables).
- Basel I guidelines publication year: 1988.
- Implementation dates by country (as used for bank-specific Post-Basel dummy):
  - Egypt (1997)
  - Jordan (1992)
  - Lebanon (1995)
  - Morocco (1996)
  - Tunisia (1999)
- Primary bank-balance-sheet measures used:
  - RGTA: real growth of total assets.
  - GOVSEC: ratio of government securities over total assets.
  - TCAPR: total equity over total assets (total capital ratio).
  - LAR: net loans over total assets.
  - RGLoans: real growth of net loans.
  - LogA: logarithm of total assets.
- Data sources: Bankscope for bank variables; International Financial Statistics (IFS) for macro variables; Central bank web sites for Post-Basel implementation dates.

### Methodology and empirical approach
- Primary frameworks:
  - Berger and Udell (1994) structural-break approach (risk-retrenchment test).
  - Peek and Rosengren (1995 a,b) short-run impact / dynamic loan-growth approach.
- Main econometric specifications:
  - Model (1): Djt = α0 + α1 Post-Basel-RPjt + α2 Xjt + εjt — difference-in-means pre- and post-Basel for RGTA, GOVSEC, TCAPR, LAR.
  - Model (2): LARjt = α0 + α1 Post-Basel-RPjt + α2 TCAPRjt + α3 (Post-Basel-RPjt · TCAPRjt) + α4 Xjt + εjt — tests risk-retrenchment interaction.
  - Model (3): RGLoansjt = α0 + α1 TCAPRjt-1 + α2 ΔTCAPRjt + α3 (ΔTCAPRjt · TCAPRjt-1) + α4 logAjt + α5 Xjt + … + εjt — dynamic loan-growth (Peek & Rosengren style).
- Controls include: real GDP growth per capita (Growth in GDP), lending-deposit interest rate differential (Interest rate), exchange rate Loc. Cur./(US$).
- Identification strategy: bank-level panel (pooled annual time-series and cross-section), bank-specific Post-Basel dummies, macro controls to isolate supply-side effects.

### Key empirical findings — descriptive patterns
- Pre- vs Post-Basel descriptive highlights (all countries aggregated unless country-specified):
  - Average real growth Total Assets: pre-Basel 10.43%; post-Basel 11.54%.
  - Net Loans/Total Assets: pre-Basel 83.54%; post-Basel 14.71% (panel tables report country-level series with large heterogeneity).
  - Equity/Total Assets: pre-Basel 14.09%; post-Basel 9.28%.
  - Government Securities/Total Assets: pre-Basel 31.36%; post-Basel 31.36%.
- Country heterogeneity (selected):
  - Jordan, Tunisia, Morocco: did not experience a slowdown in net loans after Basel I (qualifications by country-level detail).
  - Egypt and Lebanon: experienced a slowdown in net loans post-Basel I.
  - Jordan: notable increase in equity growth post-Basel I; total assets grew faster post-Basel I driven by higher holdings of government securities.
  - Morocco and Tunisia: surge in real growth of total assets post-Basel I, particularly government securities.

### Main econometric results (selected coefficients and patterns)
- Model (1) — RGTA (All countries):
  - Post-Basel-R.P. 0.337*** (13.95) — significant positive association with real total asset growth in pooled sample.
  - Growth in GDP 2.596*** (6.61).
  - Loc. Cur./(US$) -5.675*** (-41.55).
  - No. of Banks 105; No. of Obs 1244.
- Model (1) — TCAPR (All countries):
  - Post-Basel-R.P 0.018*** (5.42) — significant increase in equity/total assets post-Basel in pooled sample.
  - Loc. Cur./(US$) -0.259*** (-8.75).
  - No. of Banks 105; No. of Obs 1244.
- Model (1) — GOVSEC (All countries):
  - Post-Basel-R.P -0.093*** (-4.95) — pooled sample shows significant reduction in government securities/total assets post-Basel.
  - Loc. Cur./(US$) -0.576*** (-3.92).
  - No. of Banks 87; No. of Obs 921.
- Model (2) — LAR (All countries, Berger & Udell approach):
  - Post-Basel-R.P 1.725*** (2.98).
  - Lag Eq/Ta * Post-Basel-R.P -16.731*** (-2.86).
  - Growth in GDP 8.227** (2.48).
  - No. of Banks 105; No. of Obs 1139.
- Model (3) — RGLoans (All countries, dynamic loan-growth):
  - Lag Eq/Ta 2.974*** (3.89).
  - LogA 13.38** (2.24).
  - Growth in GDP -0.128** (-2.36).
  - Loc. Cur./(US$) 3.505** (2.45).
  - No. of Banks 105; No. of Obs 1138.
- Country-specific notable estimates:
  - Egypt (Model 1, RGTA): Post-Basel-R.P. 0.386*** (7.67); Growth in GDP 4.234*** (2.95).
  - Morocco (Model 1, RGTA): Post-Basel-R.P. -0.561*** (-5.89); Growth in GDP 4.716*** (3.38).
  - Lebanon (Model 1, TCAPR): Post-Basel-R.P. significant increase; average capital adequacy ratio reported approximately 16.8 percent by end-2001.
  - Tunisia (Model 1, TCAPR): Post-Basel-R.P 0.016* (1.83); capital asset ratio for commercial banking rose to 10.1 percent in 1999.
- Subsample heterogeneity (Tables 9–11):
  - Both international and domestic banks: total assets, equity, net loans increased post-Basel I.
  - National banks increased GOVSEC holdings post-Basel I; international banks decreased GOVSEC holdings.
  - Listed and non-listed banks: positive and significant impact on total assets, equity, net loans regardless of listing status.
  - Private and state-owned banks: positive and significant effects on total assets, equity, net loans regardless of ownership; both types held less GOVSEC post-Basel I.

### Interpretation and robustness
- Aggregate conclusion: implementation of Basel I did not, in general, slow credit expansion in the sampled MENA countries.
- Evidence indicates:
  - Capital adequacy ratios increased equity and coincided with credit and asset expansion in several cases.
  - Demand-side macroeconomic variables (real growth, interest rate differentials, exchange rate movements) often dominated and sometimes offset potential adverse supply-side effects of capital regulations.
  - No uniform shift into government securities across all countries as a result of Basel I; results mixed by country and subsample.
- Robustness checks: structural break tests, panel specifications adjusted from Berger & Udell and Peek & Rosengren frameworks, inclusion of macro controls, and heterogeneity analyses by nationality, listing status, and ownership.

### Policy implications and recommendations
- Main policy messages:
  - Enforcing capital adequacy requirements increased banks’ equity growth post-Basel I across the sample, but did not, on average, slow credit expansion.
  - Prudential regulations should be carefully assessed to avoid unintended imbalances while enhancing banking system resilience.
  - Monitor banks’ performance and intermediation function to reduce financial vulnerability and limit potential economy-wide spillovers.
  - Implement prudential measures to hedge against macro and micro shocks and increase resilience of the banking system.
  - Monetary policy should be geared toward managing liquidity to influence economic conditions that stimulate credit growth.
  - Given strong demand for credit, focus on enhancing regulations and prudential measures that streamline the supply of credit while maintaining adequate safeguards.
- Research implication:
  - Determining the “right benchmark” for regulations requires careful analysis of capital regulation effects on credit growth to avoid jeopardizing banks’ ability to service the economy.

### Country-focused summaries (selected regulatory and supervisory highlights)
- Egypt:
  - 2003 Central Bank and Banking Sector Law increased CBE independence; minimum paid-up capital of national banks raised from LE 100 million to LE 500 million; capital adequacy ratio increased to 10 percent (from 8 percent).
  - By end-March 2003, majority of banks complied with new minimum capital adequacy ratio of 10 percent.
  - Reported reduction in total number of banks from 62 in 2000 to 39 in 2010 (table referenced).
- Jordan:
  - Banking system characterized by high capital ratios, liquidity, profitability; NPLs generally high with concentration in deposits and loans.
  - 2003 FSSA: most prudential standards aligned with international best practice; plans to restructure undercapitalized banks.
- Lebanon:
  - Financial intermediation equivalent to around 240–250 percent of GDP (large bank-focused sector).
  - Minimum capital adequacy ratio of 8 percent in line with Basel I from March 1995; average capital adequacy approximately 16.8 percent by end-2001.
- Morocco:
  - Banking Law of July 1993 unified legal framework and supervisory regime; foreign capital about 21 percent of banking-sector assets.
  - Credit to private sector expanded from approximately 25 to 48 percent (reported).
  - State presence decreased to 30 percent of total bank assets.
- Tunisia:
  - 2006 FSSA: existing number of NPLs does not constitute a significant threat to macroeconomic stability, but public banks hold more than half of all NPLs.
  - Capital asset ratio for commercial banking rose to 10.1 percent in 1999; unprovisioned bad loans reduced to 14.1 percent of net liabilities from 18.4 percent in 1997.

*Source: _wp13160 - REFERENCES (content excerpt).*

### References .............................................................................................................

### _wp13160 - References

### Introduction and research question
- Basel I was negotiated in 1988 to set common bank capital requirements across 12 industrial countries with the intent to promote soundness and stability of the international banking system.
- The paper investigates whether the adoption and implementation of Basel I (risk-based capital adequacy requirements) affected credit availability and banks’ portfolio allocation in a sample of MENA countries.
- Hypothesized channels:
  - Regulatory tax channel: higher risk weights increase the cost of holding riskier assets, inducing substitution out of high-risk assets (e.g., commercial loans) into less risky assets (e.g., government securities), potentially causing a “credit crunch.”
  - Competitive lending channel: more competitive banks might expand lending and charge higher interest rates to offset higher capital costs, depending on demand elasticity.
  - Supply- and demand-side constraints (liquidity, collateral requirements, high NPLs, macroeconomic demand factors) may mediate net effects on credit growth.

### Sample, scope, and data
- Geographic focus: Middle East and North Africa (MENA).
- Sample countries: Egypt, Jordan, Lebanon, Morocco, and Tunisia.
- Sample period: 1989-2004.
- Basel I guidelines publication year: 1988.
- Exclusions: Oil-producing countries (because asset growth likely driven by oil price/production and predominance of Islamic banks differing in capital financing) and other MENA countries with data constraints.
- Rationale for 1989-2004 span: to examine effects of Basel I; testing the impact of publishing the guidelines since banks likely adjusted strategy toward compliance over the ensuing time span.

### Methodology and empirical approach
- Primary frameworks employed:
  - Berger and Udell (1994) framework to test for a structural break in banks’ loan supply following Basel adoption.
  - Peek and Rosengren (1995 a,b) alternative framework to test short-run impact of capital regulations.
- Analysis tests:
  - Impact of the capital adequacy ratio independently and interactively with Basel regulations on credit expansion.
  - Consideration of supply- and demand-side determinants (macroeconomic variables, liquidity, collateral, NPLs) to isolate the effect of capital adequacy requirements, data permitting.

### Main findings and empirical results
- Aggregate finding:
  - The implementation of Basel I did not, in general, slow credit expansion in the countries under investigation.
- Specific observations:
  - The capital adequacy ratio has not made a difference in banks’ ability to expand credit.
  - The effect of Basel I on credit expansion does not vary with the initial capital ratio at banks.
  - Capital adequacy ratios and enforcement of regulations increased equity along with credit and asset expansion in the sampled countries.
  - Macroeconomic variables—real growth, the interest rate, and exchange rate depreciation—may have offset adverse effects of capital regulations on credit supply; evidence on these offsets is mixed across countries.
- Implication: demand-side determinants are important drivers of credit expansion in the sample.

### Policy implications and recommendations
- Monetary policy should be geared toward managing liquidity to influence economic conditions that stimulate credit growth.
- Given strong demand for credit, policy priorities should:
  - Focus on enhancing regulations and prudential measures that streamline the supply of credit.
  - Reinforce the contribution of financial intermediation to economic growth while maintaining adequate prudential safeguards.
- Research implication: determining the “right benchmark” for regulations requires careful analysis of capital regulation effects on credit growth to avoid jeopardizing banks’ ability to service the economy.

*Source: _wp13160 - References (content excerpt).*

### Section 5, we report the empirical results. Section 6 concludes and offers policy implications.

### _wp13160 - Section 5, we report the empirical results. Section 6 concludes and offers policy implications.

### I. LITERATURE REVIEW — theoretical and empirical strands
- Two strands: theoretical and empirical.
- BIS (1999) surveyed evidence on the effectiveness of the 1988 Basel Accord within the G-10 countries.
- Key empirical findings (selected studies and results as reported):
  - Shrieves and Dahl (1992): risk-based capital standard is effective (U.S. commercial banks).
  - Calem and Rob (1996); Jacques and Nigro (1997): confirm effectiveness of Basel I on risk allocation (U.S. banks, periods 1984–93 and 1990–91).
  - Aggarwal and Jacques (1998): undercapitalized banks increased capital target ratios more quickly (U.S., 1991–93).
  - Ediz et al. (1998): regulation effective in the United Kingdom.
  - Rime (2001): confirms finding for Swiss banks.
  - Montgomery (2001): panel of Japanese bank balance sheets (fiscal years 1982–99) finds neither international nor domestic asset portfolios are strongly affected by total regulatory capital ratio.
  - Koehn and Santomero (1980); Kim and Santomero (1988): capital requirements can change composition of risky assets, potentially increasing risk and failure probability.
  - Blum (1999): capital regulation does not prohibit banks from undertaking a higher degree of risk; moral hazard problem.
  - Marshall and Prescott (2000); Vlaar (2000): efficient banks may seek more profit opportunities under higher capital requirements.

- Impact on credit expansion — theoretical background:
  - Bernanke and Gerther (1995): theoretical underpinnings that inability to comply with higher capital requirements can lead banks to shrink credit supply (Myers and Majluf (1984) cited).
  - Holmstrom and Tirole (1997): capital ratio behaves pro-cyclically (increasing during expansion, decreasing during contraction).
  - Diamond and Rajan (2000): strong relationship between banks’ assets and liabilities; deposits increase during expansion, coinciding with credit expansion and rising capital adequacy ratios.

- Empirical evidence on lending and capital regulation (selected studies and conclusions):
  - Bernanke and Lown (1991): loan growth during 1991–92 recession positively linked to initial capital ratios (U.S. data).
  - Berger and Udell (1994): micro-bank level analysis shows lending and securities categories declined substantially in early 1990s due to macro/regional effects.
  - Peek and Rosengren (1995a, b): evidence that lower loan demand and capital-crunch-induced decline in loan supply together reduced lending (New England).
  - Brinkmann and Horvitz (1995): significant loan supply responses to Basel I.
  - Furlong (1992); Haurbrich and Wachtel (1993); Lown and Peristiani (1996): capital regulation contributed to a decrease in lending and a U.S. credit crunch.
  - Wagster (1999): similar conclusion for Canada and the United Kingdom.
  - Furfine (2000): robust correlation between shocks to bank capital and a fall in lending (U.S.).
  - Furfine (2001): while capital regulation matters, toughened supervisory scrutiny had a larger influence on balance-sheet choices during the early 1990s U.S. credit crunch.
  - Kim and Moreno (1994); Ito and Sasaki (1998); Woo (1999); Honda (2002): evidence from Japan that regulatory pressure on capital positions slowed lending growth; international standards reduced credit expansion slightly more than domestic regulations.

- Emerging markets and cross-country evidence:
  - Watanabe (2004): prudential regulation slows credit expansion; capital crunch driven by regulation.
  - Ghosh and Ghosh (1999); Agung et al. (2001): Indonesia experienced declining real credit supply and a credit crunch during crisis.
  - Chiuri et al. (2002): sample of 16 emerging countries — introduction of higher minimum bank capital requirements may induce aggregate slowdown of bank credit.
  - Barajas and Steiner (2002): eight Latin American cases — post-Basel I banks increased capital, decreased total assets, or shifted asset composition toward less risky assets.
  - Chiuri et al. (2002): panel of 572 banks in 15 developing countries — imposition of capital regulation induced a reduction in loan supply and total lending.

- Contrasting findings and null results:
  - BIS (1999) review: near-term response to tougher capital requirements mainly by reducing lending; little conclusive evidence that regulation induced banks to maintain higher capital-to-asset ratios than they would choose unregulated.
  - Ashcraft (2001): little evidence that 1980s capital regulation materially influenced bank capital ratios.
  - Flannery and Rangan (2005): find some influence of capital regulation on actual bank capital ratios.
  - Barrios and Blanco (2003): Spanish commercial banks (1985–91) unconstrained by capital regulation.
  - Beatty and Gron (2001): similar results for 438 publicly traded U.S. holding companies (1986–95).
  - Barajas, Chami, and Cosimano (2005): little evidence that loan-asset ratio or average loan growth declined after Basel I adoption in Latin America.

- MENA-region specific literature:
  - A decade of sound macroeconomic policies allowed many MENA countries to weather the global financial crisis relatively well.
  - Turkish banking sector: major consolidation during 1999–2003.
  - Egyptian banking sector: major consolidation during 2003–06 due to increased capitalization requirements under Egyptian Banking Law of 2003.
  - Murinde and Yaseen (2004): impact of Basel regulations on bank capital and risk behavior in MENA.
  - Nasr (2009): role of banks in Egypt — progress since mid-2004 but challenges remain; financial intermediation low over 2000-2008; finance concentrated to privileged enterprises, limited access for SMEs and start-ups.
  - Ben Naceur and Kandil (2009): impact of capital requirements on banks’ cost of intermediation and performance in Egypt — results supported CBE enforcement of capital regulations starting in 1991.
  - Reda and Isik (2006): measured change in efficiency and productivity of Egyptian commercial banks (1995–2003); recommended government policies to foster competition.
  - Abdel-Baki (2010): assessed effectiveness of banking reform on performance of Egyptian banks (26 banks, 2004–09); prepared guidelines to enhance efficiency.
  - Poshakwale and Qian (2009): reforms in Egypt had a positive significant impact on competition and efficiency.
  - Steinherr, Tukel, and Ucer (2004): Turkish banking sector compared well with new EU members in 2004 but challenges remained in introducing Basel II and upgrading capital markets.
  - Sayilgan and Yildirim (2009); Isik and Darrat (2008): studies on Turkish banking profitability determinants and macroeconomic effects; illiquidity determined mainly by macroeconomic conditions was major cause of bank failures, indicating heavy burden of policy mistakes.
  - Hakim and Neaime (2005a, 2005b): comparisons across MENA banks — hedging practices vary in Egypt, Lebanon, Kuwait, UAE; risk mitigation policies more uniform in Jordan, Bahrain, Saudi Arabia, and Turkey.

- Paper’s stated contribution and research questions:
  - Builds on Berger and Udell (1994) structural-break approach and Peek and Rosengren (1995a,b) short-run impact framework.
  - Aims to uncover evidence for:
    - (i) Is there evidence of an increase in banks’ capitalization after enforcing Basel I requirements?
    - (ii) What are the effects on equity assets and the composition of risk in the asset portfolio?

### III. BANKING SECTOR DEVELOPMENTS AND REGULATIONS — overview and country highlights
- General note: Section provides overview for five MENA countries in the sample; Table 1 referenced for major banking indicators (table excluded from this overlay).

- Cross-country snapshot (as reported):
  - Lebanon: largest number of banks in the sample; average bank size smaller than in Morocco, Jordan, or Egypt.
  - Jordan: higher proportion of international banks relative to domestic banks compared to other regional countries.
  - Most banks in the region are listed and privately owned; trend increased over time.
  - The section clarifies developments following introduction of Basel I that motivated the study.

- A. Egypt — developments and regulatory changes
  - Egyptian banking sector expanded markedly in the mid-1970s following an open-door policy; Law 120/1975 defined bank operations.
  - 1990s reforms: strengthening bank supervision and regulations based on international standards.
  - Central Bank of Egypt (CBE) viewed banking soundness as paramount for economic revival.
  - Banking reform program aimed at reducing market concentration and increasing competition; restructuring and privatization of public banks:
    - One of the four public banks was privatized (note: Bank of Alexandria was acquired by the Italian San Paolo Bank in 2006).
    - Public banks mandated to divest shares in joint venture banks, reducing ownership stake to a maximum of 20 percent.
  - Supervision:
    - Banks supervised by the Banking Control Department of the CBE; supervision described as strong.
    - IMF FSAP report of 2002: CBE complied with most Basel Core Principles for Effective Banking Supervision.
  - Legal and regulatory reforms:
    - 2003: government and CBE drafted new Central Bank and Banking Sector Law to increase CBE independence, reinforce supervisory role, and increase bank efficiency and competitiveness.
    - July 2003 law established CBE independence.
    - Modifications and amendments of CBE rules and regulations introduced; connected and related party lending regulations enforced since November 2002.
    - By end-March 2003, majority of banks complied with new minimum capital adequacy ratio of 10 percent and additional capital injections to all state-owned banks had been implemented.
    - Provisioning levels for classified loans monitored closely.
    - Other prudential regulations: increasing minimum paid-up capital of banks; improving offsite supervision; preparing banks for Basel II.
  - Unified banking law of 2003 specifics:
    - Raised minimum required paid-up capital of national banks from LE 100 million to LE 500 million.
    - Capital adequacy ratio requirement increased to 10 percent (from 8 percent for risk-weighted assets).
    - Resulted in major wave of consolidation over 2004–06: small banks and poor performers targeted for acquisition; foreign banks participated in acquisitions to enter Egyptian market.
    - Foreign bidders mentioned (as reported): BNP Paribas, Barclays, Piraeus, Credit Agricole, Societe Generale, BLOM, Audi.
    - Reported reduction in total number of banks from 62 in 2000 to 39 in 2010 (Table (A1) referenced).

- B. Jordan — financial stability and supervision
  - Macroeconomic conditions conducive to financial stability; external developments noted as primary potential risk.
  - Banking system dominates financial intermediation; most banks are well capitalized, liquid, profitable, and can withstand considerable shock.
  - Non-performing loans (NPLs) generally high; higher concentration in deposits and loans.
  - 2003 Financial Sector Stability Assessment (FSSA) findings:
    - High capital ratios, liquidity, profitability; four undercapitalized banks after restructuring one bank.
    - Plans to restructure the four undercapitalized banks.
    - Strengthened banking supervision; most prudential standards aligned with international best practice.
    - System vulnerability to geopolitical shocks (FSSA highlighted).

- C. Lebanon — banking sector size and supervision
  - Financial sector is bank-focused, exceptionally large and relatively stable.
  - As of February 2004: sector consisted of 53 commercial banks, 10 specialized medium- and long-term credit banks, 28 financial institutions, eight financial, and three leasing companies; foreign banks well represented.
  - Financial intermediation level equivalent to around 240–250 percent of GDP, reflecting large size of banking sector.
  - Banks’ profitability fell with reduction in banks’ holdings of Treasury bills.
  - NPLs are of concern given relatively low provisioning levels.
  - Prudential supervision weaknesses have been remedied through overhaul of regulation; tighter money-laundering controls implemented.
  - Supervisory institutions:
    - Central Bank supervises and regulates banking system.
    - Banking Control Commission performs supervisory functions as an independent body with a separate budget.
    - Higher Banking Council (HBC) serves as supreme banking court with final decisions and sanctioning powers.
  - Regulatory timeline:
    - Starting March 1995, commercial banks required to meet minimum capital adequacy ratio of 8 percent in line with Basel I.
    - By end-2001, average capital adequacy ratio of commercial banks approximately 16.8 percent.
    - Banks obliged to prepare financial statements; auditors to publish consolidated and checked annual statements.

- D. Morocco — structure, reforms, and performance
  - Credit institutions: 21 banks (12 commercial banks, four specialized banks, four subsidiaries, one branch of a foreign bank) and 70 finance companies.
  - Commercial banks account for 78 percent of non-consolidated assets of the banking system; specialized banks have 22 percent.
  - Banking Law of July 1993 eliminated distinction between commercial banks and specialized financial agencies; unified legal framework and supervisory regime.
  - Foreign capital significant: approximately 21 percent of banking sector assets.
  - Banking sector dominates financial system but market penetration and size remain modest by regional and international standards.
  - Recent activity marked by gradual sustained liberalization accompanied by new prudential regulations in line with international standards.
  - State presence decreased to 30 percent of total bank assets; credit to private sector expanded from approximately 25 to 48 percent.
  - Reforms assisted by the World Bank included elimination of credit ceilings, interest rate liberalization, adoption of new banking law (1993), gradual elimination of monetary holdings of government securities, and strengthening prudential regulations to international standards.
  - Result: financial sector increasingly operating under market rules; financial intermediation activity intensified.
  - Overall commercial banks’ financial situation described as healthy and clearly improved since (text ends here in supplied content).

*Source: _wp13160 - Section 5, we report the empirical results. Section 6 concludes and offers policy implications.*

### 1993. Net earnings of the country’s banking system are well above international levels and

### 1993. Net earnings of the country’s banking system are well above international levels and returns on assets and equity compare very favorably with these of banks elsewhere

### Banking sector profitability and capital adequacy
- Net earnings of the country’s banking system are well above international levels and returns on assets and equity compare very favorably with these of banks elsewhere.
- Specialized banks represent the weakest segment of the banking sector, accounting for 50 percent of total loans in arrears.
- The banks’ foreign exchange risk exposure is currently limited and well below potential limit.
- Overall, the quality of the loan portfolio, net of provision, does not currently threaten the capital adequacy of commercial banks.
- The banking system has a relatively adequate capital base, consisting of Tier 1 capital and yielding an average capital adequacy ratio of 12 percent.

### Tunisia: nonperforming loans and restructuring
- The 2006 FSSA for Tunisia indicates that the existing number of NPLs does not constitute a significant threat to macroeconomic stability.
- NPLs represent a source of inefficiency and distortion in the banking system that needs to be addressed.
- Public banks hold more than half of all NPLs and continue to weigh disproportionately on the system.
- Provisioning is low because of over-reliance on collateral, although realization of collateral is difficult.
- Tunisia has made progress in implementing the FSAP recommendations, particularly in the area of banking sector restructuring.
- Banking sector performance has strengthened under the impetus of public bank restructuring and tighter prudential controls and supervision.
- All major indicators of bank soundness have improved:
  - The capital asset ratio for the commercial banking sector as a whole rose to 10.1 percent in 1999, with only one small bank still failing to reach the minimum 8 percent ratio.
  - The level of unprovisioned bad loans was brought down to 14.1 percent of net liabilities, from 18.4 percent in 1997.
- The decline in unprovisioned bad loans resulted from tighter supervision and measures to facilitate provisioning, write-offs and the establishment of loan recovery agencies.
- Continuing risks and reform needs:
  - The credit culture will have to be strengthened to contain the risks of accumulating new bad loans.
  - Restructuring of resource allocation associated with trade liberalization could generate new pressures on banks’ loan portfolios.
  - Given the large role of public banks (60 percent of total banking sector assets), reforms of bank practices are urgently needed to meet the requirements of a more open economy.

### Methodology: investigating capital regulation and credit crunch
- Previous research has investigated the link between bank capital regulation, the loss of bank capital, and bank shrinkage (capital crunch).
  - Cited work includes Bernanke and Lown, 1991; Furlong, 1992; Bizer, 1993; Cantor and Wenninger, 1993; Haurbrich and Wachtel, 1993; Baer and McElravey, 1994; Berger and Udell, 1994; Hancock, Laing, and James, 1995.
  - Most studies attributed the capital crunch to large losses in bank capital, in combination with the adoption of new capital standards.
- To establish whether regulatory enforcement actions have contributed to a credit crunch, the authors constructed a pooled annual time-series and cross-section panel of banks’ balance sheets in five MENA countries: Egypt, Jordan, Lebanon, Morocco, and Tunisia.
- Measures employed in the analysis:
  - Real change in total assets.
  - Net loans over total assets.
  - Banks’ holdings of government securities over total assets.
- The empirical analysis investigates determinants of differences in asset portfolio behavior of banks, allowing for the possibility that a crunch may have occurred during the phase-in period for risk-based capital under Basel regulations.
- Sample period: 1989-2003.
- Dates of implementation of the capital adequacy requirement by country:
  - Egypt (1997)
  - Jordan (1992)
  - Lebanon (1995)
  - Morocco (1996)
  - Tunisia (1999)
- Sample inclusion notes:
  - Algeria, Mauritania and Libya are excluded because there is no sufficient number of banks (less than five banks in the data base).
  - For the GCC countries, mainstream banks are islamic and the economy is undiversified outside the oil sector, which would bias the results regarding credit expansion.

*Source: _wp13160 - 1993. Net earnings of the country’s banking system are well above international levels and returns on assets and equity compare very favorably with these of banks elsewhere*

### introduction from other demand and supply factors that could affect credit growth, it is necessary

### _wp13160 - introduction from other demand and supply factors that could affect credit growth, it is necessary

### Research objective and identification strategy
- Define a credit crunch as a decline in credit availability or a leftward shift in the supply curve for loans, relative to normal times.
- Use a relatively long control period to test for secular lending patterns and to control for fluctuations in credit demand.
- Control for demand-side determinants (macrovariables such as GDP, interest rates, exchange rates) to address identification of credit volume changes attributable to supply-side factors, including changes in the capital adequacy ratio.
- Rationale example: higher GDP growth stimulates both demand and supply of credit by increasing investor confidence.

### Dependent variables and hypotheses
- Dependent variables: real growth rates of banking indicators and end-of-year ratio indicators.
- Proxies and indicators used:
  - Real growth of total assets (RGTA)
  - Ratio of government securities over total assets (GOVSEC)
  - Total capital ratio (TCAPR)
  - Loan-asset ratio (LAR)
  - Real growth of net loans (RGLoans)
- Hypotheses:
  - A significant reduction in lending and total assets, or a change in asset composition (more government securities), after Basel I would support a voluntary risk-retrenchment hypothesis.
  - Risk-retrenchment hypothesis: banks with low capital reduce lending relative to better-capitalized banks.
  - Lending view of monetary transmission: reduction in bank loan allocation exacerbates economic slowdowns and weakens monetary policy effectiveness.

### Empirical models and estimation strategy
- Model (1) (difference in means pre- and post-Basel):
  - Djt = α0 + α1 Post-Basel-RPjt + α2 Xjt + εjt
  - D represents dependent variables RGTA, GOVSEC, TCAPR, LAR.
  - Post-Basel-RP: bank-specific dummy equal to 1 for years after Basel I implementation in bank j and 0 before.
  - X variables: real GDP growth per capita (Growth in GDP), differential between loan and deposit interest rates (Interest rate), exchange rate (Loc. Cur/USD).
- Model (2) (risk retrenchment / Berger and Udell approach, adjusted):
  - LARjt = α0 + α1 Post-Basel-RPjt + α2 TCAPRjt + α3 (Post-Basel-RPjt · TCAPRjt) + α4 Xjt + εjt
  - Interpretation:
    - Negative α1 indicates loans decreased after Basel I regardless of risk.
    - Positive α2 expected if banks with lower capital lend less on average.
    - Positive α3 expected if Basel I increased risk sensitivity and better-capitalized banks could expand loans.
  - Adjustments relative to Berger and Udell (1994): (i) annual data, (ii) credit crunch defined as decline in credit availability, (iii) lagged variables not included in equation (2), (iv) one sample of banks within countries.
- Model (3) (Peek and Rosengren approach, adjusted):
  - RGLoansjt = α0 + α1 TCAPRjt-1 + α2 ΔTCAPRjt + α3 (ΔTCAPRjt · TCAPRjt-1) + α4 logAjt + α5 Xjt + α6 ... + εjt
  - Dependent variable RGLoans: change in real net loans normalized by capital-to-assets ratio at beginning of year.
  - Expectations:
    - α1 and α2 positive if better-capitalized banks and increases in capital produce higher loan growth.
    - α3 expected negative: effect of ΔTCAPR is smaller when initial TCAPR is high.
  - Controls: logarithm of total assets (logA) and macro-variables X.

### Data scope and country coverage
- Region: MENA sample including Egypt, Jordan, Lebanon, Morocco, and Tunisia.
- Diagnostic analysis indicates heterogeneous patterns across these five countries in loan growth following Basel I implementation.
- Note: dummy implementation dates are bank-specific as Basel I adoption dates vary across countries.

### Key empirical findings (descriptive and econometric)
- Descriptive patterns:
  - Average real growth of loans was higher in the pre-Basel period across the five countries.
  - Rate of growth of equity was higher on average pre-Basel I.
  - Average growth of total assets was slightly higher post-Basel I, implying greater portfolio diversification.
  - Country patterns:
    - Jordan, Tunisia, Morocco: did not experience a slowdown in net loans (qualifications by country-level detail).
    - Egypt and Lebanon: experienced a slowdown in net loans.
    - Jordan: significant increase in equity growth post-Basel I; total assets grew faster post-Basel I driven by higher holdings of government securities.
    - Morocco and Tunisia: despite reduction in average growth of equity, surge in real growth of total assets (particularly government securities).
- Econometric model (1) results summary:
  - Positive and significant Post-Basel dummy for RGTA in Egypt, Morocco, and pooled sample: significant growth in total assets post-Basel I.
  - Macroeconomic variables show demand-channel dominance: positive and significant coefficients indicate demand-side factors accelerated credit growth in Egypt, Lebanon, Morocco, Tunisia, and pooled sample.
  - Currency depreciation slows credit expansion in Lebanon, Morocco, and pooled sample; in Tunisia depreciation stimulates credit (export-led demand).
  - Interest rate differential widens with credit booms and coincides with asset expansion in Jordan.
- Model (1) with equity/TCAPR as dependent:
  - TCAPR increased significantly post-Basel I in Lebanon, Morocco, Tunisia, and pooled sample.
  - Mixed demand-side effects: higher real growth increases TCAPR in Morocco; higher interest rates and currency depreciation decrease TCAPR.
- Model (1) with GOVSEC dependent:
  - Mixed evidence: significant reduction in GOVSEC post-Basel I in Jordan and pooled sample; increase in Lebanon post-Basel I (high government debt and excess liquidity).
  - Currency depreciation decreases GOVSEC holdings (Jordan, Lebanon, pooled sample).
  - Widening lending-deposit margin increases GOVSEC holdings (Egypt, Jordan).
  - Overall combined evidence points to significant increases in equity correlated with increases in total assets and GOVSEC post-Basel I in several cases.
- Model (2) with net loans/total assets ratio dependent:
  - Positive and significant Post-Basel dummy for LAR in Lebanon, Morocco, Tunisia, and pooled sample: increase in loans-to-assets ratio post-Basel I regardless of bank risk level.
  - Interaction term negative and significant in Morocco, Tunisia, and pooled sample: higher initial capital relative to assets associated with reduction in net loans ratio (contradicting risk-retrenchment hypothesis in direction for lower-capital banks).
  - Real growth positively affects net loans/asset ratio in Egypt; negatively in Lebanon, Tunisia, and pooled sample (possible portfolio diversification toward sovereign bonds/equity).
  - Widening lending-borrowing differential decreases net loans/asset ratio in Egypt and Jordan.
- Model (3) with growth rate of net loans dependent:
  - Lagged TCAPR positive and significant in Egypt, Lebanon, Morocco, and pooled sample: higher beginning-of-year capital adequacy associated with higher subsequent net loan growth.
  - ΔTCAPR (change in equity) effect mixed:
    - Positive contribution to net loan growth in Egypt and Lebanon.
    - Negative contribution in Jordan (demand-side factors may dominate).
  - Interaction term (ΔTCAPR · initial TCAPR) positive and significant in Jordan and pooled sample: effect of change in capital on loan growth is high even when initial capital ratio is high (contrary to risk-retrenchment hypothesis).
- Subsample analyses:
  - By nationality (Table 9): total assets, equity, net loans increased post-Basel I for both national and international banks. National banks increased GOVSEC holdings post-Basel I; international banks decreased GOVSEC holdings.
  - By quotation status (Table 10): positive and significant impact on total assets, equity, net loans regardless of listed/unlisted status; both types held less GOVSEC post-Basel I.
  - By ownership (Table 11): positive and significant effects on total assets, equity, net loans regardless of ownership; both private and state-owned banks held less GOVSEC post-Basel I.

### Interpretation and robustness
- Overall evidence does not support a pervasive credit crunch caused by Basel I across the MENA sample.
- Stronger support found for demand-side determinants (macroeconomic fundamentals) than for supply-side constraints from prudential regulation.
- Some country-specific and subsample heterogeneity suggests that international banks had greater portfolio diversification options than national banks.
- Robustness checks: structural break tests using dummy variables; models adjusted from Berger and Udell (1994) and Peek and Rosengren (1995b) to include macroeconomic controls and panel structure.

### Policy implications and conclusions
- Enforcing capital adequacy requirements increased banks’ equity growth post-Basel I across the sample, but did not, on average, slow credit expansion; total assets and loans mostly increased post-Basel I except in Lebanon.
- No consistent evidence that banks systematically shifted into safer government securities holdings as a result of Basel I across all countries.
- Findings highlight the dominant role of macroeconomic fundamentals in driving credit expansion in these MENA countries; supply-side prudential constraints were less binding in the sample.
- Policy recommendations:
  - Prudential regulations should be carefully assessed to avoid unintended imbalances while enhancing banking system resilience.
  - Monitor banks’ performance and intermediation function to reduce financial vulnerability and limit potential economy-wide spillovers.
  - Implement prudential measures to hedge against macro and micro shocks and increase resilience of the banking system.
- Broader implication: absent prudential regulations, rapid credit growth can exacerbate negative shocks and propagate financial crises; monitoring and balanced regulation are necessary to safeguard stability.

*Italic source attribution: _wp13160 - introduction from other demand and supply factors that could affect credit growth, it is necessary*

### REFERENCES

### _wp13160 - REFERENCES

### References Cited
- Extensive bibliography covering banking regulation, capital adequacy, the Basel Accord, credit crunch episodes, bank behavior, and monetary transmission. Key authors and works include:
  - Abdel-Baki, M., 2010; Ashcraft, A., 2001; Aggarwal, R., and K. Jacques, 1997; Agung et al., 2001; Baer and McElravey, 1993; BIS, 1999.
  - Barajas, A., and Steiner, Roberto, 2002; Barajas, Adolfo, Ralph Chami, and Thomas Cosimano, 2005; Barrios, V. Jan Blanco, 2003.
  - Beatty, Anne, and Anne Gron, 2001; Ben Naceur, S., and Kandil, M., 2009; Berger, A. N., and Gregory F. Udell, 1994.
  - Bernanke, Ben S., and Alan Blinder, 1988; Bernanke, 1992; Bernanke and Gertler, 1995; Bernanke and Lown, 1991.
  - Bizer, David S., 1993; Blum, J., 1999; Brinkmann and Horvitz, 1995; Calem and Rob, 1996.
  - Cantor and Wenninger, 1993; Chiuri, Ferri, and Majnoni, 2002; Diamond, D. W., 1984; Diamond and Rajan, 2000.
  - Dietrich, Kimball, and James, 1983; Dionne and Harchaoui, 2003; Ediz, Michael, and Peraudin, 1998.
  - Flannery and Rangan, 2005; Furfine, 2000 and 2001; Furlong, 1992; Gertler and Gilchrist, 1991, 1993.
  - Ghosh and Ghosh, 1999; Hakim and Neaime, 2005a, 2005b; Hancock, Laing, and Wilcox, 1995.
  - Haurbrich and Wachtel, 1993; Holmstrom and Tirole, 1997; Honda, 2002; IMF Financial Sector Stability Assessments (Egypt 2002; Jordan 2003; Tunisia 2006).
  - Ito and Sasaki, 1998; Jacques and Nigro, 1997; Keeley, 1988; Kim and Moreno, 1994; Kim and Santomero, 1988; Koehn and Santomero, 1980.
  - Konishi and Yasuda, 2004; Lown and Peristiani, 1996; Marshall and Prescott, 2000; Mingo, 1975.
  - Montgomery, 2001; Murinde and Yaseen, 2004; Myers and Majluf, 1984; Nasr, 2009; Pazarbasioglu, 1997.
  - Peek and Rosengren (multiple papers 1994–2000); Peltzman, 1970; Poshakwale and Qian, 2009; Rebelo and Mendes, 2000.
  - Reda and Isik, 2006; Rime, 2001; Romer and Romer, 1990; Sayilgan and Yildrim, 2009; Shrieves and Dahl, 1992.
  - Steinherr, Tukel and Ucer, 2004; Van Roy, 2003; Vlaar, 2000; Wagster, 1999; Wall and Peterson, 1987, 1995.
  - Watanabe, 2004; Woo, 1999; World Bank, Financial Sector Strategy Note, 2000.
- Regional and country-specific studies cited: Egypt, Jordan, Lebanon, Morocco, Tunisia, Turkey, Japan, Finland, Indonesia, Japan, Canada, United States, Latin America, MENA region, East Asia.

### Table 1 — Variable Definitions and Sources
- RGTA: This variable is measured by the real growth of total assets — Bankscope.
- GOVSEC: This variable is the ratio of government securities over total assets — Bankscope.
- TCAPR: This variable is defined as total equity over total assets — Bankscope.
- LAR: This variable is measured by net loans over total assets — Bankscope.
- LogA: This variables is the logarithm of total assets — Bankscope.
- Post-Basel-RP: This is a dummy variable that equals 1 for each year after the implementation of the Basel I Accord in the specific bank j and 0 before that — Central bank web sites.
- Growth in GDP: This variable is measured by the real GDP growth per capita — International Financial Statistics (IFS).
- Interest rate: This variable is computed as the differential between loan and deposit interest rates — International Financial Statistics (IFS).
- Loc. Cur./(US$): This variable is defined as the exchange rate measured by the price of the U.S. dollar in terms of domestic currency — International Financial Statistics (IFS).

### Table 2 — Sample Period and Observations (by country)
- Countries and sample periods:
  - Egypt: 1989-2004; Basel 1 implementation date 1997; No. of banks 28; Sample representation ratio 97%; Average size in billion of USD 2.778; No. of banks per nationality Inter. 13 Dom. 15; No. of banks by listing status Non listed 10 Listed 18; No. of banks by type of ownership Private 14 State-owned 9.
  - Jordan: 1989-2004; Basel 1 implementation date 1992; No. of banks 9; Sample representation ratio 90%; Average size in billion of USD 3.167; No. of banks per nationality Inter. 6 Dom. 3; No. of banks by listing status Non listed 0 Listed 9; No. of banks by type of ownership Private 9 State-owned 0.
  - Lebanon: 1992-2003; Basel 1 implementation date 1995; No. of banks 45; Sample representation ratio 90%; Average size in billion of USD 0.589; Data for nationality, listing and bank ownership not available for Lebanon.
  - Morocco: 1989-2004; Basel 1 implementation date 1996; No. of banks 9; Sample representation ratio 82%; Average size in billion of USD 3.417.
  - Tunisia: 1989-2004; Basel 1 implementation date 1996; No. of banks 12; Sample representation ratio 86%; Average size in billion of USD 1.207.
- Note: "The data for Lebanon related to nationality, listing and bank ownership are not available."

### Table 3 — Descriptive Statistics (selected figures)
- Panel A: Behaviour Pre-Basel 1 (All countries and by country):
  - All countries: Average real growth Total Assets 10.43%; Net Loans/Total Assets 83.54%; Equity/Total Assets 14.09%; Government Securities/Total Assets 31.36%.
  - Egypt (1989-1996): Total Assets growth 5.93%; Net Loans/Total Assets 14.09%; Equity/Total Assets 9.28%; Government Securities/Total Assets 31.36%.
  - Jordan (1989-1991): Total Assets growth 6.47%; Net Loans/Total Assets -9.38%; Equity/Total Assets 7.72%; Government Securities/Total Assets 42.85%.
  - Lebanon (1989-1994): Total Assets growth 26.11%; Net Loans/Total Assets 293%; Equity/Total Assets 83.54%; Government Securities/Total Assets 9.46%.
  - Morocco (1989-1995): Total Assets growth 4.79%; Net Loans/Total Assets 12.86%; Equity/Total Assets 73.39%; Government Securities/Total Assets 24.93%.
  - Tunisia (1989-1998): Total Assets growth 3.7%; Net Loans/Total Assets 16.32%; Equity/Total Assets 8.06%; Government Securities/Total Assets 29.46%.
- Panel B: Behaviour Post-Basel 1 (All countries and by country):
  - All countries: Average real growth Total Assets 11.54%; Net Loans/Total Assets 14.71%; Equity/Total Assets 9.28%; Government Securities/Total Assets 31.36%.
  - Country-specific post-Basel values are reported in the table (e.g., Egypt (1998-2004) Total Assets growth 8.71%, etc.).

### Tables 4–8 — Regression Results: Impact of Basel I Accord (selected coefficient highlights and test statistics)
- General notes across tables:
  - t-statistics are in parentheses. Significance at the 10%, 5%, and 1% level is noted by *, ** and *** respectively.
  - a Fischer’s test under the null hypothesis that the coefficients specific to each bank are all equal and constant.
  - b The χ² is for the Wald test whether the explanatory variables in the random coefficient models are jointly significant.
  - c Hausman test asymptotically distributed as χ² under the null hypothesis that the explanatory variables are not correlated with the error terms.

- Table 4: Effects on Bank’s Real Total Asset (panel regression of eqs. (1))
  - All countries:
    - Constant 6.747*** (40.31)
    - Post-Basel-R.P. 0.337*** (13.95)
    - Growth in GDP 2.596*** (6.61)
    - Loc. Cur./(US$) -5.675*** (-41.55)
    - F-statistic 2718***; F-test 3.34; No. of Banks 105; No. of Obs 1244
  - Egypt:
    - Constant 6.541*** (26.61)
    - Post-Basel-R.P. 0.386*** (7.67)
    - Growth in GDP 4.234*** (2.95)
    - Loc. Cur./(US$) -0.004 (-0.25)
    - Interest rate -0.027* (-1.66)
    - F-statistic 250.24***; F-test 0.14; No. of Banks 28; No. of Obs 378
  - Morocco:
    - Constant 13.888*** (14.18)
    - Post-Basel-R.P. -0.561*** (-5.89)
    - Growth in GDP 4.716*** (3.38)
    - Loc. Cur./(US$) -0.009*** (-15.98)
    - Interest rate -0.017*** (-2.68)
    - F-statistic 1332***; F-test 0.63; No. of Banks 47; No. of Obs 498
  - Tunisia:
    - Constant 5.941*** (17.16)
    - Post-Basel-R.P. 0.001 (0.03)
    - Growth in GDP 2.514*** (2.87)
    - Loc. Cur./(US$) 0.581*** (3.29)
    - F-statistic 55.48***; F-test 0.34; No. of Banks 12; No. of Obs 149

- Table 5: Effects on Bank’s Equity/Total Assets ratio (panel regression of eqs. (1))
  - All countries:
    - Constant 0.242*** (12.13)
    - Post-Basel-R.P 0.018*** (5.42)
    - Loc. Cur./(US$) -0.259*** (-8.75)
    - F-statistic 79.22***; No. of Banks 105; No. of Obs 1244
  - Egypt:
    - Constant 0.125*** (9.31)
    - Post-Basel-R.P 0.004 (0.90)
    - Loc. Cur./(US$) -0.002* (-1.68)
    - Interest rate -0.005*** (3.44)
    - F-statistic 40.49***; F-test 1.51; No. of Banks 28; No. of Obs 373
  - Morocco:
    - Constant 0.172 (1.34)
    - Post-Basel-R.P 0.039*** (3.13)
    - Growth in GDP -0.316* (-1.69)
    - Loc. Cur./(US$) 0.054 (0.499)
    - Interest rate -0.002** (-2.06)
    - F-statistic 170.50***; F-test 1.61; No. of Banks 47; No. of Obs 498
  - Tunisia:
    - Constant 0.032 (1.25)
    - Post-Basel-R.P 0.016* (1.83)
    - Growth in GDP 0.112 (0.97)
    - F-statistic 49.47***; F-test 0.90; No. of Banks 12; No. of Obs 149

- Table 6: Effects on Government Securities/Total Assets ratio (panel regression of eqs. (1))
  - All countries:
    - Constant 0.779*** (6.37)
    - Post-Basel-R.P -0.093*** (-4.95)
    - Loc. Cur./(US$) -0.576*** (-3.92)
    - F-statistic 8.82***; χ²-Wald 49.38***; No. of Banks 87; No. of Obs 921
  - Egypt:
    - Constant 0.221 (0.98)
    - Post-Basel-R.P -0.051 (-0.67)
    - Interest rate 0.062** (2.15)
    - F-statistic 24.01***; F-test 0.05; No. of Banks 23; No. of Obs 255
  - Jordan:
    - Constant 0.309*** (2.69)
    - Post-Basel-R.P -0.045*** (-2.76)
    - Loc. Cur./(US$) -0.335 (-1.90)*
    - Interest rate 0.004* (1.69)
    - F-statistic 26.39***; F-test 0.60; No. of Banks 8; No. of Obs 99
  - Morocco:
    - Constant -0.055 (-0.29)
    - Post-Basel-R.P 0.041** (3.13)
    - Post-Basel-R.P * other effects reported; F-statistic 25.08***; F-test 6.40; No. of Banks 47; No. of Obs 456

- Table 7: Effects on Net Loans/Total Assets ratio (Berger & Udell, 1994 approach; panel regression of eqs. (2))
  - All countries:
    - Constant 6.543*** (2.78)
    - Post-Basel-R.P 1.725*** (2.98)
    - Lag Eq/Ta * Post-Basel-R.P -16.731*** (-2.86)
    - Growth in GDP 8.227** (2.48)
    - F-statistic 3.92***; χ²-Wald 26.10***; No. of Banks 105; No. of Obs 1139
  - Egypt:
    - Constant 0.6843*** (15.53)
    - Post-Basel-R.P 0.028 (1.17)
    - Interest rate -0.034*** (-6.83)
    - F-statistic 217.55***; F-test 2.14; No. of Banks 28; No. of Obs 345
  - Lebanon, Morocco, Tunisia: country-specific coefficients and significance reported (e.g., Morocco Constant -26.793 (-1.35) with Post-Basel-R.P 6.806*** (3.75); Tunisia Post-Basel-R.P 0.289*** (3.85)).

- Table 8: Effects on Real Growth of Net Loans (Chiuri et al., 2002 approach; panel regression of eqs. (3))
  - All countries:
    - Constant 0.717* (1.72)
    - Lag Eq/Ta 2.974*** (3.89)
    - LogA 13.38** (2.24)
    - Growth in GDP -0.128** (-2.36)
    - Loc. Cur./(US$) 3.505** (2.45)
    - F-statistic 47.13***; χ²-Wald 9.59; No. of Banks 105; No. of Obs 1138
  - Egypt:
    - Constant 0.091 (0.71)
    - Lag Eq/Ta 0.535*** (3.46)
    - Diffeq 2.301*** (3.99)
    - Lag Eq/Ta* diffeq -10.657*** (-2.18)
    - Loc. Cur./(US$) 0.753* (1.82)
    - Interest rate -0.011** (-2.14)
    - F-statistic 10.13***; F-test 2.08***; No. of Banks 28; No. of Obs 345
  - Morocco:
    - Constant -0.908*** (-4.01)
    - Lag Eq/Ta 0.641*** (6.36)
    - Diffeq 0.695*** (7.27)
    - LogA -0.688 (-1.28)
    - Loc. Cur./(US$) -0.385 (-1.36)
    - Interest rate 0.625*** (3.97)
    - F-statistic 21.12***; χ²-Wald 2.50***; No. of Banks 47; No. of Obs 451

### Tables 9–11 — Heterogeneity Analyses (by nationality, listing status, and ownership)
- Table 9: Discrimination by the Nationality of the Bank (international vs domestic)
  - Real total asset (international banks):
    - Constant 6.265*** (26.39); Post-Basel-R.P 0.441*** (10.81); Growth in GDP 2.384*** (4.96); F-statistic 230.01***; F-test 1.79; No. of Banks 25; No. of Obs 326
  - Real total asset (domestic banks):
    - Constant 6.801*** (9.21); Post-Basel-R.P 0.373*** (9.21); Growth in GDP 2.011*** (3.47); Loc. Cur./(US$) 2.011*** (3.47); F-statistic 139.74***; F-test 5.45; No. of Banks 33; No. of Obs 417
  - Net loans (international banks):
    - Constant 0.477*** (16.03); Post-Basel-R.P 0.203*** (6.86); Lag Eq/Ta 1.065*** (4.44); Lag Eq/Ta*Post-Basel-R.P -1.476*** (-5.42); Lag Eq/Ta coefficient -0.041*** (-6.53); F-statistic 14.81***; χ²-Wald 16.75***; No. of Banks 25; No. of Obs 304
  - Additional coefficients and panels for government securities and equity split by nationality reported in the table.

- Table 10: Discrimination by the Status of Quotation (Listed vs Non Listed)
  - Real total asset (Listed):
    - Constant 6.384*** (36.47); Post-Basel-R.P 0.443*** (12.17); Growth in GDP 2.041*** (4.38); F-statistic 265.26***; F-test 2.33; No. of Banks 43; No. of Obs 568
  - Real total asset (Non Listed):
    - Constant 7.153*** (15.96); Post-Basel-R.P 0.281*** (8.70); Growth in GDP 2.771*** (6.06); Loc. Cur./(US$) -0.033** (2.10); F-statistic 143.59***; F-test 2.01; No. of Banks 15; No. of Obs 178
  - Net loans and other outcomes reported separately for Listed and Non Listed banks with coefficients (e.g., Listed Net loans Constant 0.086*** (11.20); Post-Basel-R.P 0.022*** (5.16)).

- Table 11: Discrimination by the Type of Ownership (Private vs State-owned)
  - Real total asset (Private):
    - Constant 6.197*** (32.49); Post-Basel-R.P 0.481*** (11.49); Growth in GDP 2.042*** (4.28); F-statistic 246.71***; F-test 5.48; No. of Banks 35; No. of Obs 471
  - Real total asset (State-owned):
    - Constant 7.121*** (8.74); Post-Basel-R.P 0.279*** (8.74); Growth in GDP 2.035*** (3.41); F-statistic 114.63***; F-test 0.40; No. of Banks 23; No. of Obs 275
  - Net loans (Private):
    - Constant 0.021*** (9.58); Post-Basel-R.P 0.021*** (4.07); F-statistic 18.84***; F-test 1.27; No. of Banks 35; No. of Obs 471
  - Net loans (State-owned):
    - Constant 0.506*** (20.41); Post-Basel-R.P 0.164*** (7.61); Lag Eq/Ta 0.799*** (3.80); Lag Eq/Ta*Post-Basel-R.P -0.918*** (-4.17); F-statistic 18.56***; χ²-Wald 19.43***; No. of Banks 35; No. of Obs 436

*Content unit: _wp13160 - REFERENCES (extracted tables and bibliography from the source PDF).*

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