Stress Tests Scenarios: An Approach to Determining the Effect of Credit Risk on Loans, Capital Adequacy and Bank Efficiency: A Comparative Study in a Sample of Commercial Banks from Iraq, Qatar, and

Abstract

While most of the previous studies have dealt with the impact of a number of factors on non-performing loans, this paper is an attempt to verify the influence of non-performing loans on each loan, capital adequacy and bank efficiency. This study is carried out within a Stress Tests framework as a comparative applied study conducted on the data of a sample of commercial banks in Iraq, Qatar, and the United States of America for the period from 2018-2020.

The Stress Tests method with a single factor is adopted according to three scenarios ranging in intensity from light, medium, and high intensity. The test is conducted using Excel and E-views V.12 programs, and the findings show that the three banks in the sample have been exposed to credit risk in the third scenario of high severity. The results show that the banks in the sample have been exposed to three Stress Tests scenarios to varying degrees. Additionally, there has been a negative relationship and effect of the credit risk through non-performing loans on loans, capital adequacy ratio and bank efficiency.