The Vulnerability of Lebanese Alpha Banks to the Macroeconomic Downturn and Stress Testing

Abstract

Aim: This study investigates how vulnerable Lebanese Alpha Banks are through macroeconomic downturns and stress testing. Lebanese Alpha banks face several downturns, especially in an unstable market like Lebanon. Thus, the employment of such tests will help increase and enhance their productivity.

Methodology: The research design is explanatory. The positivism philosophy was used where data was interpreted objectively and depended on quantifiable observations that led to statistical analyses. The research is advanced using deductive reasoning and was conducted in an archival strategy.

Findings: Results from a stress test that was conducted on banks' financial statements indicated the importance of such tests to be applied facing the deviation in macroeconomic conditions that face Lebanon. The main results of this study are as follows: growth is mainly driven by proper risk management, regular supervision must be applied on the implementation of rules and regulations by banks, a second-grade appraisal must be done to follow up on the loans, stress tests are crucial to preserving credit review, and any bank in a sensitive position must be immediately backed up.

Implications: The study's outcomes and recommendations are extremely significant for the Lebanese banking sector and its regulatory bodies, financial analysts, and economists. It adds value and information concerning the banking sector with correlation to macroeconomic and stress lines.