This paper is about factors affecting credit risk of Islamic banks in the Gulf Cooperation Council countries using website data covering 25 Islamic banks over 2006 to 2010. This study uses non-performing loans as a proxy for credit risk, which is the dependent variable with three macro-economic, and six firm-specific independent variables. We find income is significantly negatively related to credit risk, which is consistent with findings in other countries about credit risk. Some firm-specific variables such as leverage, liquidity are also relevant variables for credit risk, which results are also consistent with bank behaviour reported in other studies. Credit risk is also broadly affected by both macro and firm-specific factors as found in other regions. Inflation and interest rates do not appear to be relevant. These results would suggest non-performing loan is broadly correlated with factors identified in other studies of banks.

Purpose: This study examines the impact of macroeconomic factors on GCC banks’ stability. As GCC countries still rely on oil export revenues to cover government expenses and perform an undiversified economy, hence, increased awareness of the financial diversifications in the GCC financial sectors is needed to contribute alongside oil sector revenues and then improve the non-oil sectors’ investments in order to eliminate the oil and macro-financial linkage that causes any changes in the oil price to impact the whole macroeconomic and financial system of the country. In this context, this research selected the most important macroeconomic factors such as GDP growth, inflation rate, exchange rate, global financial crisis period (2008/2009), oil price fluctuation, and political instability within the period from 2005 to 2020, which covers many economic and political events. Design/methodology/approach: We used panel cointegration analysis, starting with a panel unit root test and including PFMOLS and PDOLS estimations. Additionally, FGLS estimation was used due to the existence of heteroskedasticity and auto-correlation in the sample. Findings: The findings suggest that there is an adverse relationship between the inflation rate, global financial crisis (2008/2009) and oil price changes, and the financial stability of GCC Islamic and conventional banks. However, the Islamic bank is less adversely affected by a financial crisis, oil price changes, inflation rate and political instability. Originality/value: This proposed model provided better knowledge for regulators and policymakers about the external impacts on GCC banks’ stability, to commit an appropriate economic policy to help in reforming the economic and financial imbalances.

Purpose: The main purpose of this paper is to investigate the impact of capital ratio and liquidity risks and the effects of the Global Financial Crisis (GFC) periods on financial stability of conventional and Islamic banks before, during, and after GFC in the year of 2008 five GCC countries. To examine empirically the comparison between conventional and Islamic banks based on financial stability and soundness, as well as capitalization and liquidity in the light of the adverse effects of GFC and oil prices declining during the period of (2000-2017).Design/methodology/approach: By using time series data, this study employs Pedroni’s panel cointegration analysis to test the long run relationship between financial stability of conventional banks and Islamic banks as a dependent variable and independent variables including financial crisis under three periods; pre (2006-2007), during (2008-2009) and post (2010-2011) crisis. As well as employing Generalized Least Squares (GLS) to examine the effects between independent variables which are GDP, inflation, financial crisis periods, oil prices fluctuations risk, banking competition, financial sector development, liquidity risk and capital adequacy ratio and dependent variable which is financial stability of conventional and Islamic banks in GCC countries before (2000-2006) during (2006-2009) and after (2010-2017) crisis.Findings: The findings of this research suggest that there is a long run relationship between financial stability of conventional and Islamic banks and capital ratios, liquidity risk and other independent variables. As well as study’s findings support some previous studies and it generally concludes that Islamic banks were performed better during the crisis than conventional banks. Whereas Islamic banks were more stable during crisis as their business model helped to limit the adverse effects of crisis in 2008, they were also more capitalized and less exposure to liquidity risk. Nevertheless, decrease in Islamic banks’ liquidity led some Islamic banks in GCC countries to declare significant losses in 2009.Originality/value: The result of the study contributes towards understanding the determinants of financial stability of both Islamic banks and conventional banks during financial crisis periods. It is important for policy ramifications by the Central Banks in GCC in terms of treating both types of banks differently to mitigate against future financial crises.

Purpose: The main purpose of this paper is to investigate the relationship between financial stability in Islamic banks and financial stability and soundness in conventional banks for five GCC countries.Design/methodology/approach: By using time series data, this study employs Pedroni’s panel cointegration to test the long-run relationship between financial stability of Islamic banks and financial stability of conventional banks in GCC countries during the period of (2000-2017). Besides, the study also employs Granger causality to test the causal link between stability of two types of banks (Islamic and Conventional). As well as employing Generalized Least Squares (GLS) to examine the effects between independent variables which are financial stability of conventional banks and their profitability, impact of period of financial crisis (2008/2009), oil prices fluctuations, banking concentration and financial sector development and financial stability of Islamic banks (as the dependent variable).Findings: The findings of this research suggest that there is a long-run, significant and positive relationship between the financial stability of conventional banks and its Islamic counterpart. At the same time, the financial stability of conventional banks is found to Granger caused the stability of Islamic banks.Originality/value: The results of the study contribute towards understanding the determinants of the financial stability of both Islamic banks and conventional banks and how they affect each other. This is important for policy ramifications by the Central Banks in GCC in terms of treating both types of banks differently to mitigate against future financial crises.