Measuring and analyzing the impact of Banking Competition on financial stability indicators: an applied study on the Iraqi banking sector

Abstract

The research aims at determining the impact of banking competition on indicators of financial stability in the Iraqi economy, as well as measuring banking competition using the Panzer-Rosse model. Standard methods were adopted through the application of the Panel Data method, which combines cross-sections and time series, based on annual data that included (30) traditional and Islamic banks for the period (2011-2016). The results of the Panzer-Rosse model show that competition between traditional and Islamic private banks is high, while competition among private Islamic banks is a monopolistic competition. As for the impact of the banking competition on the indicators of financial stability, the study concluded that there is a significant and reverse effect of the banking competition on both the non-performing loans and the bank liquidity, while there is a significant and systematic effect of the banking competition on the profitability of banks. This means that the banking competition has a positive impact on the indicators of financial stability In the Iraqi economy. The study concluded with a set of recommendations, the most important of which are: To encourage competition in the Iraqi banking sector by creating the appropriate conditions such as allowing government institutions to deposit their money with private commercial banks and not only to deposit them in government banks; especially that competition plays an important role in improving the efficiency of banks and providing the best services. And the need for Islamic banks to modernize and innovate Islamic banking products such as Islamic sukuk and Islamic investment funds.