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Mr. Heiko Hesse and Mr. Tigran Poghosyan
This paper analyzes the relationship between oil price shocks and bank profitability. Using data on 145 banks in 11 oil-exporting MENA countries for 1994-2008, we test hypotheses of direct and indirect effects of oil price shocks on bank profitability. Our results indicate that oil price shocks have indirect effect on bank profitability, channeled through country-specific macroeconomic and institutional variables, while the direct effect is insignificant. Investment banks appear to be the most affected ones compared to Islamic and commercial banks. Our findings highlight systemic implications of oil price shocks on bank performance and underscore their importance for macroprudential regulation purposes in MENA countries.

conducted with banks, which provide granular insights to complement BNM’s macro stress tests. Continued policy support may be needed to avoid pro-cyclical bank lending behavior. The insolvency regime has been enhanced in anticipation of corporate sector difficulties and more resources could be provided in that area if the need arises. On financial structural issues, the authorities noted their continuous focus on enabling financial innovation to reach financially underserved segments through the planned licensing of digital banks and on testing the banking system

International Monetary Fund. Asia and Pacific Dept
Malaysia entered the pandemic from a robust economic position but has nonetheless been significantly affected. A synchronous fiscal, monetary and financial policy response has helped cushion the economic impact. As a result, after a deep recession in 2020, and assuming the pandemic is brought under control in Malaysia and globally, growth would rebound to 6.5 percent in 2021 as supply side constraints are lifted and domestic and external demand recover. Large downside risks will remain.