Recent episodes of global financialstress have underscored the importance of individual banksto the stability of their own or even the global financialsystem. Against this backdrop and to respond to the need ofWorld Bank Group staff for a wider diagnostic toolkit, wehave developed the BRI, an icon set in the form of a trafficlight to enable preliminary analyses of individualbanks' financial soundness in the region, and anExcelbased spreadsheet tool (FRIM) to facilitate itscalculation and presentation. A back-test based on actualdevelopments in the Tunisian banking system suggests thatthe BRI is able to accurately differentiate banks accordingto their financial health. The impact of the globalfinancial crisis on banking systems and banks in the MiddleEast and North Africa (MENA) has highlighted the importanceof differentiating across countries and among financialinstitutions. While the region avoided systemic bankingdistress, the crisis had a stronger impact on countries inthe Gulf Cooperation Council, where financial systems weremore globally integrated and banks more overextended.Countries elsewhere in the region, including transitioncountries, weathered the crisis better. However, protractedeconomic weakness is likely to have a significant impact onseveral banking systems and banks, which can have profoundconsequences for credit intermediation and ultimatelyeconomic growth and job creation. This underscores the needfor better tools to monitor financial risk andvulnerabilities in MENA.
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