Can Gulf Banks Pass the CCAR Stress Tests?

Abstract

The absence of a uniform standard for stress tests is a key challenge today for Central Banks in the Gulf. This paper Utilize the Dodd-Frank 2010 (CCAR) stress test to assess the balance sheets of 3 of the largest 10 banks in the GCC countries. Our results show that Riyad Bank and Qatar National Bank pass the most severe scenarios, but the National Bank of Kuwait fails both stress scenarios, potentially falling out of compliance with the Basle II requirements. The implications suggest that while the capital of the Gulf region largest banks is above regulatory requirements during normal conditions, the situation could change dramatically in stressed environments.