FRIM : A New Tool for Financial Risk Monitoring and MENA
Recent episodes of global financial stress have underscored the importance of individual banks to the stability of their own or even the global financial system. Against this backdrop and to respond to the need of World Bank Group staff for a wider diagnostic toolkit, we have developed the BRI, an icon set in the form of a traffic light to enable preliminary analyses of individual banks' financial soundness in the region, and an Excelbased spreadsheet tool (FRIM) to facilitate its calculation and presentation. A back-test based on actual developments in the Tunisian banking system suggests that the BRI is able to accurately differentiate banks according to their financial health. The impact of the global financial crisis on banking systems and banks in the Middle East and North Africa (MENA) has highlighted the importance of differentiating across countries and among financial institutions. While the region avoided systemic banking distress, the crisis had a stronger impact on countries in the Gulf Cooperation Council, where financial systems were more globally integrated and banks more overextended. Countries elsewhere in the region, including transition countries, weathered the crisis better. However, protracted economic weakness is likely to have a significant impact on several banking systems and banks, which can have profound consequences for credit intermediation and ultimately economic growth and job creation. This underscores the need for better tools to monitor financial risk and vulnerabilities in MENA.
| Summary: | Recent episodes of global financial
stress have underscored the importance of individual banks
to the stability of their own or even the global financial
system. Against this backdrop and to respond to the need of
World Bank Group staff for a wider diagnostic toolkit, we
have developed the BRI, an icon set in the form of a traffic
light to enable preliminary analyses of individual
banks' financial soundness in the region, and an
Excelbased spreadsheet tool (FRIM) to facilitate its
calculation and presentation. A back-test based on actual
developments in the Tunisian banking system suggests that
the BRI is able to accurately differentiate banks according
to their financial health. The impact of the global
financial crisis on banking systems and banks in the Middle
East and North Africa (MENA) has highlighted the importance
of differentiating across countries and among financial
institutions. While the region avoided systemic banking
distress, the crisis had a stronger impact on countries in
the Gulf Cooperation Council, where financial systems were
more globally integrated and banks more overextended.
Countries elsewhere in the region, including transition
countries, weathered the crisis better. However, protracted
economic weakness is likely to have a significant impact on
several banking systems and banks, which can have profound
consequences for credit intermediation and ultimately
economic growth and job creation. This underscores the need
for better tools to monitor financial risk and
vulnerabilities in MENA. |
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