Improving Banking Supervisory Mechanisms
In the OIC Member Countries
16
3. A Snapshot of the Banking Sector in the Selected OIC Member
Countries
In this section, we evaluate the macroeconomic developments, performance of the banking
sector and discuss recent regulation practices. A general comparative analysis of the selected
member countries is followed by a country-specific comprehensive analysis.
3.1 Banking Sector and Macroeconomic Developments in OIC Member
Countries
In this section, we present recent macroeconomic and banking sector developments in the
selected OIC member countries, specifically focusing on the aftermath of the financial crisis in
2008. Analysis covers Malaysia, Kazakhstan, Nigeria, United Arab Emirates, Saudi Arabia,
Turkey, Pakistan, Algeria and Indonesia. The set of selected countries have different economic
environments and structures, which are reflected in the composition and organization of the
banking sector.
3.1.1 Macroeconomic Developments in OIC Member Countries: A Comparative
Analysis
First, we compare selected member countries to US and Euro area in terms of their GDP per
capita, a commonly used measure of economic development. Figure 2 shows that most
member countries fall behind the Euro area and US with an exception of the United Arab
Emirates. As of year 2013, average GDP per capita among OIC countries was around 7,600 USD
(see Figure 2). This level of income is almost three times higher than that of middle-income
groups. But also US and Europe average GDP is five to six times higher than that of the OIC
countries. More importantly, some of the OIC countries did suffer from the global financial
imbalances created by the 2008 crisis. As presented in Figure 2, global credit crunch had a
particular negative impact on UAE. But except for UAE, OIC countries did not encounter a big
income shock because of 2008 crisis. It is also important to note that, neither the US crisis and
nor the Euro crisis have enabled OIC countries to achieve convergence to the developed
economies.
In Figure 3, economic growth rates in OIC member countries are presented. Growth rates of
economies in member countries are significantly higher than US and Europe, where Euro area
is barely recovering from the effects of 2008 crisis with almost no economic growth and US
moving slightly towards positive growth rates. Most member countries seem to have been
immune to the 2008 crisis by sustaining high growth rates with the exception of Turkey,
Malaysia, UAE and Kazakhstan, which are the countries exhibit highest exposures given their
dependence on foreign capital flows. Average growth rate in OIC area also tends to show less
variability, which is indicated by low standard deviations. In this period developed economies,
particularly Europe, have shown significant volatilities in its growth path.