Bank-level stability factors and consumer confidence – A comparative study of Islamic and conventional banks’ product mix

Hussein, Kassim

doi:10.1057/fsm.2010.21

Cited by 44 publications

(34 citation statements)

References 37 publications

(9 reference statements)

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“…Second, the determinants of the level of RI for IB and CB are not the same. The evidence that IB are lagging in the level of the risks they have been facing before and after the crisis is in line with findings of some earlier research (see for example Hussein, 2010, Hasan and Dridi, 2011, Alkulaib et al 2013and Aldeehani et al 2015. One obvious implication of these findings is that IB still has a long way to improving their management of risk while honoring Shari'a rules.…”

Section: Resultssupporting

confidence: 90%

Has the risk index of Islamic banks and conventional banks in GCC countries changed in response to the 2008 economic crisis?

Aldeehani

2016

JEFS

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In this empirical study, we investigate the effect of the 2008 economic crisis on the level of risks Islamic banks (IB) and conventional banks (CB) are facing and the determinants of their risk indices. We cover 20 banks operating in the Gulf Cooperation Council (GCC) countries during 2001-2014. The results indicate that while the state of the economy had no effect on the risk index (RI) of banks, the type of bank did have an effect. The results suggest that the RI of IB was significantly lower than that of CB before and after the crisis indicating higher risks for IB. While the RI of CB is explained by solvency and liquidity variables, the RI of IB is explained by liquidity and profitability variables. Discussions, interpretations of research results and implications are provided.

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Section: Resultssupporting

confidence: 90%

Has the risk index of Islamic banks and conventional banks in GCC countries changed in response to the 2008 economic crisis?

Aldeehani

2016

JEFS

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“…Some researchers point out that the Islamic banks' stability is better than the conventional bank. Some plausible reasons are from the limited investment of Islamic bank because they have to meet the Sharia principles (Hussein, 2010), having better risk management (Hassan, Khan, & Paltrinieri, 2019) and having low credit risk because of no speculative transaction in their financing (Miah & Uddin, 2017). On another hand, some empirical literature indicates that the Islamic banks' stability is worse than conventional banks because moral hazard and asymmetric information bear on the profit-and-loss sharing system (Kabir, Worthington, & Gupta, 2015;Lassoued, 2018).…”

Section: Introductionmentioning

confidence: 99%

Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Widarjono

2020

Jurnal Keuangan Dan Perbankan

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Islamic banks in Indonesia are very vulnerable to the instability of their business processes because of their small market share. Moreover, based on their financial performances, Islamic banks are worse than those of conventional banks due to lower profits (ROA) and higher Non-performing financing (NPF). Our study investigates the stability of Islamic banks. We measure the stability using Z-score and NPF. Instead of an individual bank, the study applies an aggregate data of Islamic banks encompassing Islamic commercial banks along with Islamic business units. Monthly time series data, covering January 2010 to December 2018 are selected. We apply the Autoregressive Distributed Lag (ARDL) model. The findings document that the Islamic bank's specific variables affecting stability are size, CAR, and efficiency. The larger size and CAR support the Islamic bank's stability. Lower efficiency increases the Islamic bank's instability. Meanwhile, Inflation and exchange rates affect the Islamic bank's stability. Economic downturns due to inflation and depreciation of rupiah increase the instability of Islamic banks. AbstrakBank Islam di Indonesia sangat rentan terhadap ketidakstabilan proses bisnis mereka karena pangsa pasar yang kecil. Selain itu, berdasarkan kinerja keuangan mereka, bank syariah lebih buruk daripada bank konvensional karena laba lebih rendah (ROA) dan pembiayaan bermasalah (NPF) lebih tinggi. Penelitian ini menyelidiki stabilitas bank Islam. Stabilitas keuangan diukur dengan menggunakan Z-score dan NPF. Penelitian ini menggunakan data agregat bank syariah yang mencakup bank komersial syariah bersama dengan unit bisnis syariah. Data yang digunakan adalah bulanan dari Januari 2010 hingga Desember 2018. Penelitian ini mengaplikasikan model Autoregressive Distributed Lag (ARDL). Temuan penelitian ini mendokumentasikan bahwa variabel spesifik bank Islam yang memengaruhi stabilitas adalah besarnya asset, CAR, dan efisiensi. Aset dan CAR yang tinggi mendukung stabilitas bank syariah. Efisiensi yang lebih rendah meningkatkan ketidakstabilan bank syariah. Sementara itu, inflasi dan nilai tukar memengaruhi stabilitas bank Islam. Penurunan ekonomi akibat inflasi dan depresiasi rupiah meningkatkan ketidakstabilan bank Islam.

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“…Instability in the banking system can be attributed to several factors ranging from both internal and external macroeconomic volatility to sharp product mix repricing (especially credit risk) which creates liquidity problems thereby lowering customer confidence (Hussein, 2010). The level of confidence customers have for banks compared to other financial and non-bank financial institutions such as shadow banking are based on several factors such as banks serve as financial intermediaries which screen potential borrowers on behalf of their depositors (Freixas & Santomero, 2003;Hussein, 2010). Banks also provide liquidity such as granting of loans and facilitating financial transaction.…”

Section: Customer Confidencementioning

confidence: 99%

“…Banks also provide liquidity such as granting of loans and facilitating financial transaction. Banks provide adequate monitoring to minimize the rate credit defaults (Grossman, 1994;Hussein, 2010). Since shadow banks engage in short-term borrowing in the money market for long-term funding and these funds are not backstopped by the government, a loss of confidence can lead to "runs" within the system just as what happened during the 2007/08 financial crisis.…”

Section: Customer Confidencementioning

confidence: 99%

Management of shadow banks for economic and financial stability in South Africa

Ilesanmi

Tewari

2019

Cogent Economics & Finance

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The global increase in the regulation of banks has encouraged the channeling of investment funds into less regulated institutions such as shadow banks to avoid restriction. Shadow banks are institutions that operate outside the regulatory framework of the traditional banking system and because of that, they lack adequate safety compared to the traditional banks. These among others have raised serious concerns, especially after the recent financial crisis as they see these institutions as a major source of risk and instability in the financial system and the economy as a whole. This study examined the link between shadow banking and financial stability in South African by employing a modest desktop literature review approach. Although the shadow banking in South Africa is advantageous in terms providing alternative source of credit to support economic activities by extending banking services and investment opportunities to the unbanked as well as those who lack knowledge of how to access capital, however, issues of regulations, management and transparency have not been adequately dealt with. These create a great risk to the economy if not properly addressed. Protecting the interest and investment of customers should be a major concern of government or regulatory ABOUT THE AUTHORS

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Bank-level stability factors and consumer confidence – A comparative study of Islamic and conventional banks’ product mix

Cited by 44 publications

References 37 publications

Has the risk index of Islamic banks and conventional banks in GCC countries changed in response to the 2008 economic crisis?

Has the risk index of Islamic banks and conventional banks in GCC countries changed in response to the 2008 economic crisis?

Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Management of shadow banks for economic and financial stability in South Africa

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