Bank supervision and bank profitability: the case of MENA countries

Using a panel of Middle East and North Africa (MENA) banks, we examine the effect of on bank profitability in the 1999-2006 period. We find that supervision differences matter. Bank profitability tends to be higher in countries in which supervisors can take legal action against external auditors for negligence, in which the central bank is responsive for supervision. On the contrary, bank profitability is negatively related to the unification of financial supervision and the existence of Deposit Insurance (DI). Also, several bank characteristics and macroeconomic factors are significantly related to bank profitability.MENA banks; bank supervision; bank profitability; regulation; scope; supervision structure; supervision independence; Middle East and North Africa countries; legal action; external auditors; negligence; central banks; financial supervision unification; deposit insurance.