Abu Dhabi, 8 June / WAM / The results of the analysis of the financial stability index showed a slight improvement in the macroeconomic index in the Arab countries, after its value rose to 0.116 points at the end of 2021, compared by 0.115 points at the end of 2020 due to the improvement in the growth rate of the gross domestic product and the ratio of foreign reserves. According to the index report for the year 2022, issued today by the Arab Monetary Fund, in collaboration with the Financial Stability Task Force in the Arab countries.
The “Financial Stability Index” measures the reality of financial stability in the Arab countries during the year 2021. The possibility that the financial system will be exposed to a financial crisis before it occurs, in order to take the necessary preventive and proactive policies and procedures .
The index achieves the ability to evaluate the integrity of the financial system based on quantitative and objective criteria, which helps to establish the principle of transparency and disclosure, and the availability of various information to the market and those involved with the financial system. do while drawing. attention to the systemic risks to which the financial system as a whole may be exposed, in addition to monitoring the development of some variables The task and comparing it over time / by mapping the risks /.
The Financial Stability Index is a complementary tool to early warning systems and stress tests, through which it reflects and identifies the extent of potential risks or fluctuations in the financial system.
The Arab Financial Stability Index consists of four main indicators, including the banking sector index (10 sub-indicators), the macroeconomic index (6 sub-indices), the capital market index (two sub-indices), and the financial cycle. index (one sub-indicator).
It is noteworthy that the value of the index varies between zero and one … and the closer the value is to one / 100%, the higher the degree of financial stability, note that the financial stability index, according to international experience, is highly sensitive.
The report’s data showed that the financial stability index rose to 0.526 points at the end of 2021, compared to 0.487 points at the end of 2020, due to the improvement in financial and economic indicators due to the efforts made by Arab countries has been used to reduce the repercussions of the emerging Corona virus crisis, which has been positively reflected in stability.
It is noteworthy that the index has seen an upward trend, reaching around 0.564 points at the end of 2019, compared to 0.321 points at the end of 2015.
The report said: “Despite the repercussions of the Corona pandemic and its effects on the economies of Arab countries, the index recorded an improvement in the year 2021 compared to 2020. The increase was 0.039 points, with a view to on the value of the index in 2021 reached a level higher than the average value of the index for the years The fifth before the Corona pandemic / 2015-2019 / which was about 0.473 points as an average for that period.
He added: “As for the sub-indices, they have all risen from the year 2021, except for the capital market index, due to the decline in the market value index to the gross domestic product as a normal and expected matter as a result. of the recovery of the economy (the place of the ratio in the index).
The capital market index reached 0.102 points in 2021 compared to 0.150 points in 2020, knowing that it reached 0.071 points in 2019. ”
Regarding the banking sector index (the largest component of the financial stability index in the Arab countries), it recorded a remarkable increase in 2021, reaching 0.293 points, compared to 0.214 points in 2020, due to the improvement in financial security indicators, in particular capital adequacy, liquidity and profitability indicators and operational efficiency.
The improvement in capital and liquidity adequacy indicators reflects the resilience, sustainability and ability of the banking sector to absorb shocks.
With regard to capital adequacy, Arab central banks have taken a conservative approach to Basel III capital adequacy requirements, followed by issuing instructions and regulatory requirements that include the obligation of commercial banks to maintain rates higher than those in Basel III requirements are prescribed, in addition to the placement of restrictions on The distribution of profits in the banking sector by the end of 2020 strengthened the capital base of banks and supported their power and ability to deal with risks.
On the other hand, the improvement in liquidity indicators in the banking sector in the Arab countries is attributed to several aspects, including the provision by central banks of additional liquidity in the banking sector by reducing interest rates on monetary policy instruments, and the promotion of the application of standards of the liquidity coverage ratio and net stable financing, in addition to The reduction or liberalization of some capital margins by some central banks, the reluctance of banks to take risks, and others.
Overall, and despite the risks and challenges posed by the emerging corona virus crisis and other challenges and risks, the results of the banking sector index analysis showed a general trend in Arab countries to adopt conservative precautionary policies. which contributed to the improvement of financial stability.
Indicators of profitability and operational efficiency in the banking sector in the Arab countries have also improved, indicating the efficiency of risk management, the efficiency of utilizing banks’ assets, and their operating ability to provide profits based on their core business.
His Excellency, the Director-General and Chairman of the Board of Directors of the Arab Monetary Fund, Dr. Abdul Rahman bin Abdullah Al-Hamidi, said: “The index provides a proactive tool for central banks and Arab monetary institutions to improve financial stability. and evaluate systemic risks in the financial sector in general and banking in particular, and strengthen the role of the financial sector in achieving sustainable development. ”
His Excellency emphasized the importance of ongoing efforts to develop the index to keep pace with developments related to financial stability issues, which provide a clear picture of the financial stability situation in the Arab countries, and the determinants and challenges they face in faces in the context of the supervisory authorities’ efforts to achieve financial stability, which contributes to the support of precautionary decisions that contribute to The security and integrity of the Arab financial and banking sector.