Analyzing the effects of actions followed by the Central Bank of Jordan during COVID-19 pandemic on financial performance of Jordanian banks

PurposeThis study analyzes the impact of the procedures followed by the Central Bank of Jordan during the COVID-19 pandemic on the financial performance of Jordanian banks listed on the Amman Stock Exchange over the period (2019Q1–2021Q3).Design/methodology/approachThe panel fixed effect model was used to measure the impact of each of the required reserve ratios and the deferred loans on the profitability of Jordanian banks represented by the return on total assets.FindingsThe results revealed a negative relationship at the significance level of 10% between the required reserve ratio and the return on total assets. Also, there is a negative relationship at the significance level of 5% between the deferred loans and the return on total assets.Research limitations/implicationsThe paper recommends the Central Bank of Jordan following a precautionary policy to encounter systematic risks that cannot be eliminated by using diversification.Originality/valueWith the severe impact of the Coronavirus pandemic on the overall economic performance of the national economic sectors and the subsequent negative impact on the living standard of society’s members, this study shows the government’s role represented by the procedures of its monetary authority (Central Bank of Jordan) to mitigate the effects of this pandemic, as well as measuring the impact of these procedures on the financial performance of Jordanian banks listed on the Amman Stock Exchange.