Conference Paper
Artificial Intelligence in Banking: Who Wins, Who Waits, and Why It Matters
No.
ERF32AC_46
Publisher
ERF
Date
May, 2026
Topic
E4. Money and Interest Rates
G1. General Financial Markets
G2. Financial Institutions and Services
This paper examines the impact of artificial intelligence (AI) adoption on bank performance, stability, and risk in the Middle East and North Africa (MENA) region. We develop a disclosure-based AI-readiness index that encompasses five dimensions: vision and strategy, data and technology infrastructure, people and expertise, implementation and impact, and governance and risk management, and then match it to panel data from 68 banks from 2016 to 2023. Dynamic panel estimations reveal that AI use is associated with higher profitability, wider margins, stronger risk control, and greater balance-sheet stability, while its impact on equity performance remains limited. The impact is heterogeneous: banks that connect strategic direction with execution benefit the most, whereas institutions that invest only in infrastructure or staff capacity gain less. Profitability, scale, and risk exposure also influence how far each bank advances in AI adoption, suggesting a feedback loop between financial strength and technological depth. The results provide guidance for investors evaluating AI disclosures, for regulators designing targeted incentives, and for researchers examining how digital technologies are transforming financial intermediation.