Impact of bank regulation on risk of Islamic and conventional banks

Hoque, Hafiz; Liu, Heng

doi:10.1002/ijfe.2462

Cited by 18 publications

(7 citation statements)

References 89 publications

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“…This idea is attractive because it uses industry data that can be easily accessed by regulators and market participants, as academics have developed various concepts and suggestions for measuring systemic risk, classifying systemically significant financial institutions, and tracking determinants of systemic risk (Choi et al, 2020;Schweizer, 2021;Steffen, 2012). Many banks suffer from the negative effects of the global financial crisis of 2008, which forced these banks to carry out large write-offs and increase the capital requirements imposed by the competent authorities in accordance to Basel 3 Agreement (Hoque & Liu, 2021). The resilience of the banking system must be strengthened in the face of potential negative shocks, which have become a feature of the era (Beltrame et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

SYSTEMIC RISK’s effect ON THE STABILITY OF THE BANKING SECTOR: EVIDENCE FROM SAUDI ARABIA

Alshadadi,

Deshmukh

2024

SEBR

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The banking sectors are exposed to a lot of pressure due to the events taking place in the region, the most important of which is the decline in global oil prices and geopolitical events that led to political instability in the Middle East. This paper aims to study the macroeconomic variables that could be potential sources of systemic risks and to test their impact on the stability of the banking sector in the Kingdom of Saudi Arabia (1984-2020), using the ARDL approach of Co- integration and stability testing. In light of the economic theory and literature, systemic risks were identified by fluctuations in oil prices, interest rates, inflation and political instability as independent variables. The results showed a significant positive effect of oil prices and inflation on the banking sector's total assets and total deposits. In addition, the interest rate has a negative effect on total assets while positively affecting total deposits. Furthermore, political instability significantly affects the total assets of the banking sector during the Yemeni war, while there is insufficient evidence about its impact on total deposits.

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Section: Introductionmentioning

confidence: 99%

SYSTEMIC RISK’s effect ON THE STABILITY OF THE BANKING SECTOR: EVIDENCE FROM SAUDI ARABIA

Alshadadi,

Deshmukh

2024

SEBR

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“…The IEF was developed by the Heritage Foundation, which annually publishes a report on this index (Hoque & Liu, 2023). For the purposes of this research, the most recent report available on the Heritage Foundation's website, from 2022, will be used.…”

Section: Theoretical Foundations Of Researchmentioning

confidence: 99%

Innovative Solutions for Economic Growth: Exploring the Impact of Economic Freedoms on Foreign Direct Investment Attraction

Štilić,

Mastilo,

Vuković

et al. 2023

Economics

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Economic freedoms are essential for the growth and development of countries, but their distribution varies across nations, resulting in differences in economic growth. This study aims to explore the impact of economic freedoms on economic growth, measured by gross domestic product (GDP) per capita and foreign direct investment (FDI) inflow, by examining the influence of institutional quality. Economic freedom indicators were obtained from the 2022 report by the Heritage Foundation, and GDP per capita and FDI indicators were sourced from the World Bank report. This study employs multivariate regression analysis to investigate the relationship between economic freedoms and economic growth. The findings suggest that economic freedoms have a positive effect on both GDP per capita growth and FDI inflow. Government integrity was found to be the primary indicator for GDP per capita growth, while Business freedom was identified as the key factor in attracting FDI. The implications of these results are significant, as they can inform policy decisions aimed at improving the standard of living by increasing GDP per capita and creating employment opportunities through FDI.

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“…These should be improved to include all types of borrowers with analysis of repayment capacities using advanced technologies. Hoque and Liu (2023) find that the regulations of Basel Accord are equally applicable to Islamic banks. Therefore, Islamic banks should also design their risk management systems taking into account the recommendations of the Basel Committee of Banking Supervision.…”

Section: Literature Reviewmentioning

confidence: 99%

Role of fintech in credit risk management: an analysis of Islamic banks in Indonesia, Malaysia, UAE and Pakistan

Shah

Fianto

Sheikh

et al. 2023

JSTPM

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Purpose The purpose of this study aims to examine the effect of fintech on pre- and post-financing credit risks faced by the Islamic banks. Design/methodology/approach This research uses primary data for fintech awareness and adoption and secondary data of various financial and economic variables from 2009 to 2021. It uses baseline regression to identify moderation of fintech controlling gross domestic products, size, return on assets and leverage. The findings are confirmed using robustness against key variable bias. It also uses a dynamic panel two-stage generalized method of moments for endogeneity. Findings The study finds that the fintech awareness and adoption are not the same across all Islamic countries. The Asia Pacific region is far ahead of the other two regions where Indonesia is ahead in terms of fintech awareness and adoption, and Malaysia is ahead in terms of reaping its benefits in credit risk management. Fintech affects prefinancing credit risk significantly more than postfinancing credit risk. Also, the study finds that Islamic banks suffer from the problem of “Adverse selection under Shariah compliance.” Practical implications This research invites regulators to introduce fintech in Islamic banks on war footing. Similar studies can be conducted on the role of other risks such as operational and market risks. Fintech will also help in improving the risk profile and stability of Islamic banks against systemic risks and financial crises. Originality/value This research has variety of originalities. First, it is the pioneering study that addresses the effect of fintech pre- and post-financing credit risks in Islamic banks. Second, it identifies “Adverse selection under Shariah compliance” for Islamic banks. Third, it helps identify how fintech can be useful in reducing credit risk that will help in reducing capital charge for regulatory capital.

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Impact of bank regulation on risk of Islamic and conventional banks

Cited by 18 publications

References 89 publications

SYSTEMIC RISK’s effect ON THE STABILITY OF THE BANKING SECTOR: EVIDENCE FROM SAUDI ARABIA

SYSTEMIC RISK’s effect ON THE STABILITY OF THE BANKING SECTOR: EVIDENCE FROM SAUDI ARABIA

Innovative Solutions for Economic Growth: Exploring the Impact of Economic Freedoms on Foreign Direct Investment Attraction

Role of fintech in credit risk management: an analysis of Islamic banks in Indonesia, Malaysia, UAE and Pakistan

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