Risk dynamics and financial stability in GCC banks: The moderating role of efficiency

The current study investigates the ingenious and exogenous factors of Gulf Cooperation Council (GCC) listed banks' financial stability with the moderating role of efficiency from 2015 to 2024. The study used the GMM model on panel data that show credit risk is positive and significantly related to financial stability. The moderating variable bank efficiency strengthens the positive impact of credit risk management on financial stability. The opposing but insignificant relationship indicates that bank efficiency does not significantly moderate the relationship between liquidity risk and financial stability. The increased operational risk negatively impacts bank stability, although it reveals that banks take on riskier loans during boom periods, creating future market instability. Economic growth rates tend to create instability within the financial system since banks increase risk when expansions occur. The financial stability grows when inflation boosts bank profitability by creating larger interest rate margin spreads. High levels of inflation establish long-term financial dangers. Proof emerges of why operational excellence stands essential for enhancing resilience in organizations. Small banks in the Gulf Cooperation Council require reliable risk management techniques and operational efficiency to preserve their financial stability.