Journal of Economics, Management and Trade

The various financial crisis incidents during the two last decades and particularly since the 2007-2008 Global Financial Crisis have revealed the complexity of the interaction between bank market structure, regulation and the stability of the banking industry. Due to its effects on financial stability, banking market structure has been a focus of academic and policy debates of which we prefer the market power paradigm. More precisely, the impact of competition and market concentration on the probability of financial crisis emerges as a crucial topic. Despite their importance, little is known about the relationship between Banking Market Power and Bank Soundness from banks of MENA region. This paper tries to overcome the tradeoff between banking market power and financial (in) stability among 157 commercial banks chosen from 18 countries of MENA region between 2000 and 2008. The results indicate that although the banks operate in a competitive market, they suffer from financial instability. The results also revealed a non-significant negative relationship between the rather low degree of market power and financial instability. In other words, we concluded that financial instability is not affected by competition in the banking market in the MENA region.