Islamic Banking: Issues in Prudential Regulations and Supervision

Errico, Luca; Farahbaksh, Mitra; Alexander, William E.; Enoch, Charles; Dept, Exchange Affairs

doi:10.2139/ssrn.882267

Cited by 25 publications

(11 citation statements)

References 1 publication

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“…Second, the present study is also the first to investigate this impact in the context of both Islamic and conventional banks. The former bank type follows Islamic law (Shariah) as a mode of operation, which prohibits dealing with interest (riba), uncertainty (gharar), gambling (mysir), and other business activities that are deemed detrimental to people's well-being [14,42]. These differences between the two bank types motivate us to examine whether the impact of FinTech firms' growth on bank stability differs between bank types.…”

Section: Introductionmentioning

confidence: 99%

The impact of FinTech firms on bank financial stability

Safiullah

Paramati

2022

Electron Commer Res

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This study is the first to examine the impact of FinTech firms on bank financial stability. Using a sample of 26 banks from an emerging market (Malaysia), over the period 2003–2018, we find that the development of FinTech firms over time increases bank financial stability. We uncover further evidence that FinTech firms’ impact on bank financial stability holds when we conduct sub-sample analyses by bank size, bank type (Islamic vis-à-vis conventional), and level of corporate governance. The results are robust to alternative model specifications, measures of financial stability, and FinTech.

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Section: Introductionmentioning

confidence: 99%

The impact of FinTech firms on bank financial stability

Safiullah

Paramati

2022

Electron Commer Res

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“…Previous research tends to indulge especially in the determinants of profit loss sharing rate in Islamic Banks in Indonesia [19], [20] or profit loss sharing rate's influence in other financial variables in Islamic banking [21], [22]. Others would prefer to analyze the interest rate-free system in banking sector [23], [24], [25] as it would provide better outlook in the banking sector as a whole, rather than just focusing in financial variables. The monetary policy that was commonly used which was conventional monetary policy, was accommodating to the presence of Islamic banking system, which would further encourage some researchers to analyze about the probability of establishing dual monetary system, or rather just adding Islamic monetary system in the country's policies [26], [27], [28], [29].…”

Section: Islamic Monetary System Sharia Banks Bi 7 Days Reverse Repo ...mentioning

confidence: 99%

Is Islamic Monetary System Possible in Indonesia? Interrelation Study between BI 7 Days Reverse Repo Rate and Nisbah Rate

Aswad,

Purnami,

Pratama

et al. 2024

suhuf

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The purpose of this study is to investigate the interrelationship between Bank Indonesia 7 Days Reverse Repo Rate (BI 7 DRRR) and Profit-Loss Sharing Rate (Nisbah Rate) in Islamic Sharia Banks (Bank Syariah Indonesia). Indonesia had been establishing conventional monetary system ever since and have yet to introduce Islamic approach to its monetary system. Now, in Islamic monetary perspective, interest rate doesn’t exist. Therefore, this research aimed to discover the possibility of Islamic approach in Indonesia’s monetary system, using Nisbah Rate launched by Islamic Sharia Banks as a substitution. The research was conducted using VAR (Vector Autoregression) to study the interrelationship between BI 7 Days Reverse Repo Rate and Nisbah Rate, using data obtained from Islamic Banking Statistics through Indonesia’s Financial Service Authority (OJK) monthly during 2021-2023. The result showed that both BI 7 Days Reverse Repo Rate and Nisbah Rate did cause impact on one another, and thus the possibility of establishing Islamic monetary system is not completely disregarded. This investigation contributes to the ongoing discourse surrounding the integration of Islamic financial principles into conventional monetary frameworks. By highlighting the reciprocal influence between conventional monetary policies and Islamic financial instruments, this study underscores the potential for a hybrid monetary system that accommodates Islamic principles within the Indonesian financial landscape.

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“…In theory, non‐PLS operations are not the mainstream model of IBs, while PLS business that often exists in the form of unsecured equity financing is the core of IBs. As PLS transactions are essentially businesses that do not require collateral, the risk of these businesses is considered greater than the non‐PLS modes assets (Errico & Farahbaksh, 1998).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…Supervisors are able to understand a bank's situation more accurately because they have unique access to private information. Supervisory agents need to ensure that the evidence provided by banks is relevant, accurate and illustrated in an un‐misleading way so that public confidence is maintained (Errico & Farahbaksh, 1998; Farooq & Zaheer, 2015). If supervisors with sufficient power are able to force higher‐quality information disclosure, private agents can benefit from it by monitoring banks more easily (Beck et al, 2006).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Impact of bank regulation on risk of Islamic and conventional banks

Hoque

Liu

2021

Int. J Fin Econ

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We analyse the impact of bank regulation on the risks of Islamic banks (IBs) and conventional banks (CBs) between 2004 and 2015 by employing 455 CBs and 95 IBs from 22 countries where IBs and CBs coexist. Since the objective of Basel regulations is to achieve a stable banking sector by mitigating risks, we examine the impact of bank regulations on various risks of IBs and CBs by using a regression framework. We examine solvency risk, credit risk, idiosyncratic risk and systemic risk by using capital oversight, restriction on activities, private monitoring and supervisory power bank regulation data provided by the World Bank. The findings show that though the Basel regulations were

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Islamic Banking: Issues in Prudential Regulations and Supervision

Cited by 25 publications

References 1 publication

The impact of FinTech firms on bank financial stability

The impact of FinTech firms on bank financial stability

Is Islamic Monetary System Possible in Indonesia? Interrelation Study between BI 7 Days Reverse Repo Rate and Nisbah Rate

Impact of bank regulation on risk of Islamic and conventional banks

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