The stamina of Lebanese banks: A curious glitch in the midst of the liquidity crisis

This paper is the first to apply the econometric Chow model to determine the impact of the 2007-2008 financial crisis on the Lebanese banking sector through testing for structural breaks in their performance from the period immediately preceding the crisis until after the crisis hit. This involved the use of thirteen financial ratios for all the Lebanese commercial banks operating in Lebanon taken from the following four categories: profitability, liquidity, credit quality and capitalization. For comparison purposes, the chosen model was also applied to the 386 leading U.S. banks in terms of assets. A positive structural break was detected in the overall performance of Lebanese banks for profitability, liquidity and credit quality ratios. Conversely, U.S. banks showed a negative structural break in almost all of the selected ratio categories. Even though Lebanese banks showed a certain resilience, not to say improvement, in response to the crisis, they continue to be at risk due to their vulnerability to a number of macro, socio and political factors.