Financial dependence patterns among Arab banking sectors in the aftermath of the 2007 global financial crisis

The global financial crisis of 2007 (GFC) has brought home the urgent need for a thorough assessment of the dependence and interaction among banking sectors, from which most of the trouble originated. It is important to note that deepening bank integration contributes to greater systemic risk which results in financial instability and financial fragility with banks becoming too interconnected to fail. Interestingly, banking sectors in the Arab economies are classified with a high concentration ratio which attributes to increases in systemic risk as banks are too-big-to-fail. This paper’s aim is to determine the level of integration, dependence and financial interconnectedness in Arab banking sectors in comparison with the U.S. and EU including UK, Germany, France, Spain and Italy for the period 2001-2016. It is based on three models to determine dependence, financial integration, and interconnectedness in Arab banking sectors to identify the complete dimensions of transmitting shocks and integrations.

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