The effect of Applying The Expected Credit Losses Model   on The Financial Solvency of Egyptian Banks: An Empirical Study

Azam, Mohsen Ebied Abd El Ghafar; El Seedy, Shefif Saad Abd El Rahman

doi:10.21608/aljalexu.2022.268660

The effect of Applying The Expected Credit Losses Model on The Financial Solvency of Egyptian Banks: An Empirical Study

Document Type : Original Article

Authors

¹ Accounting and Auditing Faculty of Commerce, University of Menoufia Egypt

² Masters in Accounting and PhD Researcher Faculty of Commerce, University of Menoufia The Egyptian Arabic Republic

10.21608/aljalexu.2022.268660

Abstract

The study aimed to analyze the impact of applying the expected credit losses model on the financial solvency indicators of banks listed on the Egyptian Stock Exchange, during the period from the first quarter of 2019 to the second quarter of 2021 for (12) banks, where the number of views that were subjected to statistical analysis reached (120) views. The study relied on a set of statistical methods to test hypotheses such as regression analysis and correlation analysis, in addition to a set of descriptive statistics to describe the behavior of the study variables and the moderation of their distributions.
The study revealed a set of results, the most important of which are: the increasing in the financial solvency indicators of Egyptian banks compared with the rates established by the Basel Committee, and the tendency of Egyptian banks to enhance the credit losses provisions to hedge against the potential credit losses in the future, in addition to the existence of significant differences between Egyptian banks in terms of the financial solvency of each bank, There are significant differences between Egyptian banks by size according to the expected credit losses model indicators, and there are significant effect of the expected credit losses model indicators on the financial solvency of Egyptian banks, where the adjusted coefficient of determination is about (0.902), and the results showed that the most influential variables on the financial solvency are Asset Risk, Financial Leverage, Expected credit losses for stage three, and Cost-to-Income Ratio. The study concluded with a set of recommendations, the most important of which are the need to increase the banks’ capital continuously to meet the increasing component of the expected credit losses provisions in the next years to preserve the regulatory capital.

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