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<p>This study examines the relationship between equity capital and bank lending growth in Europe and the MENA region from 2009 to 2020, following the 2008 financial crisis. The findings reveal distinct regional dynamics. In Europe, the Tier 1 capital ratio and profitability are positively and significantly associated with lending growth, reflecting a reliance on internal funding amid a well-capitalized but challenging economic environment. Conversely, GDP growth appears to be the primary factor associated with lending growth in MENA, while the Tier 1 ratio and profitability are insignificant. The study provides several policy recommendations. European banks with low capital should build reserves during economic upturns to enhance solvency and support lending, while high-capital banks should adopt strategies to manage overcapitalization and improve efficiency. For MENA banks, rebalancing loan portfolios to prioritize private-sector lending and fostering competition through enhanced regulatory measures could mitigate inefficiencies and promote economic growth. These findings underscore the need for tailored banking policies that align with regional economic and regulatory contexts.</p>

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The Relationship Between Bank Capital and Lending Growth in Europe and MENA

  • 期刊论文

  • 发表日期：

    2026年7月24日

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  • Marwan Alzoubi,
  • Mais Sha’ban

摘要

This study examines the relationship between equity capital and bank lending growth in Europe and the MENA region from 2009 to 2020, following the 2008 financial crisis. The findings reveal distinct regional dynamics. In Europe, the Tier 1 capital ratio and profitability are positively and significantly associated with lending growth, reflecting a reliance on internal funding amid a well-capitalized but challenging economic environment. Conversely, GDP growth appears to be the primary factor associated with lending growth in MENA, while the Tier 1 ratio and profitability are insignificant. The study provides several policy recommendations. European banks with low capital should build reserves during economic upturns to enhance solvency and support lending, while high-capital banks should adopt strategies to manage overcapitalization and improve efficiency. For MENA banks, rebalancing loan portfolios to prioritize private-sector lending and fostering competition through enhanced regulatory measures could mitigate inefficiencies and promote economic growth. These findings underscore the need for tailored banking policies that align with regional economic and regulatory contexts.