Bank lending,deposits and risk-taking in times of crisis: A panel analysis of Islamic and conventional banks

In this study, we conduct a panel analysis of Islamic and conventional banks to ascertain whether Islamic banks are able to sustain financing supply and whether its growth is higher than conventional bank lending growth in times of stress. For concreteness, we also assess whether the sustained financing supply of Islamic banks is justified by a concomitant increase in Islamic deposit growth and is not linked to excessive risk taking. Utilizing a panel sample of 25 Islamic banks and 114 conventional banks from 10 dual-banking countries, we observe sustained financing supply by Islamic banks but significant reduction in the lending growth by conventional banks during the crisis period. The results further suggest that the financing growth of Islamic banks is higher than the lending growth of conventional banks during the crisis period. However, we find no clear evidence that the deposit growth of Islamic banks behaves differently during the period. Finally, there is no indication to suggest that Islamic banks exhibit excessive risk taking in times of stress. Our results contribute to the evidence supporting the contributive role of the Islamic banking system to financial and economic stability.     

Sources of TFP growth in the Malaysian Islamic banking sector

This paper attempts to empirically analyse productivity changes of the Malaysian Islamic banking sector during the period of 2001–2004 by applying the non-parametric Malmquist productivity index method. During the period of study, the empirical findings suggest that the Malaysian Islamic banking sector has exhibited productivity progress during the earlier years before declining during the latter years. The results suggest that foreign banks have exhibited higher productivity levels compared with their domestic counterparts during the earlier years, while the domestic banks’ productivity levels were relatively higher compared with the foreign banks during the latter years.     

Measuring volatility persistence for conventional and Islamic banks: An FI-EGARCH approach

This paper studies the volatility dynamics of conventional and Islamic banks from the Gulf Cooperation Council (G.C.C) countries during calm and crisis periods, providing a dual comparison in time and space. In particular, it proposes an empirical measure of volatility persistence using the FIEGARCH (Fractionally Integrated Exponential Generalized Auto-Regressive Conditional Heteroscedasticity) model. This specification is useful for reproducing further asymmetry in volatility dynamics and provides a direct measure of long-term volatility dependence. Our findings point to three interesting findings. First, volatility exhibits asymmetry as bad news has a significantly higher impact on volatility than positive news. Second, bad news affects the volatility of conventional banks more strongly than that of Islamic banks. Third, it seems that following a shock, volatility is more persistent in conventional banks than in Islamic Banks. Accordingly, Islamic banks are more resilient than conventional banks, but the degree of resilience is somewhat heterogeneous and sample dependent. Thus, while this may appear to suggest that we could regulate the conventional bank system using the industry rules of Islamic banks, it is worth noting that Islamic banks in Saudi Arabia tend to provide the most resilient Islamic Bank benchmark model.     

Bank Performance and Credit Availability in the Bulgarian Banking Sector, 1997-2001

Abstract

The 1997 financial crisis wiped out 30% of the Bulgarian banking sector and created severe strains on corporations. With the establishment of the currency board in 1997 and the new Banking Law, which set the legal framework for proper bank supervision, major Bulgarian banks were rapidly privatized through sales to foreigners, now controlling around 80% of bank assets. Since 1997, the Bulgarian banking sector has recovered from the crisis by improving its profitability and efficiency and adopted a legal framework compatible with the European Union standards. Based on a regression analysis of bank balance sheets and income statements, this paper shows that low level of credit volume during 1997-1999 derived from banks' cautious stance towards credit making reflecting both the ongoing risks in the real sector, and the stringent new banking regulations. Large banks, however, benefited from scale economies in improving profitability in the same period.     

Capital buffer and credit‐risk adjustments in Islamic and conventional banks

The main purpose of this article is to empirically investigate the interactions between changes in capital buffer and changes in credit risk, using panel data of Islamic and conventional banks located in the Middle East and North Africa (MENA) region over the period 1999–2016. A negative two‐way relationship between the changes in capital buffer and the changes in credit risk is found for the two types of banks, that is, banks tend to decrease their capital buffers in response to an increase in risk exposure and limit their risky activities in response to an increase in their capital buffers. Dividing our period of study into three subperiods to assess the effect of the last financial crisis 2007–08 on the adjustment process, we point out the negative bidirectional relationship between the changes in capital buffer and the changes in credit risk of the two types of banks is present for the three subperiods except the case of conventional banks during the precrisis period. Moreover, we provide evidence that Islamic banks adjust their capital buffer in response to the changes in credit risk regardless of the existence or not of a deposit insurance scheme. In contrast, the negative two‐way relationship between the changes in capital buffer and the changes in credit risk in conventional banks is found only in countries without deposit insurance schemes.     

Technical Efficiency of the Ghanaian Banking Industry and the Effects of the Entry of Foreign Banks

The effects of the entry of foreign banks and changes in bank concentration on the technical efficiency of domestic banks in Ghana over the period 2000–2008 is analyzed. Technical efficiency scores were obtained by the Data Envelopment Analysis. Then, the Tobit regression was used to analyze the impact of hypothesized explanatory variables on bank efficiency. Foreign bank share of total industry assets was used to proxy the impact of foreign banks. The findings suggest that efficiency of domestic banks has been positively affected by the entry of foreign banks and reduction in concentration. Thus, the central bank's policy of liberalizing the banking sector appears to be well placed.     

Underpinning the benefits of green banking: A comparative study between Islamic and conventional banks in Bangladesh

This study aims to compare environmental motives and performance of conventional and Islamic banks in Bangladesh. Green compliance index was developed based on the Bangladesh Bank (the central bank of Bangladesh) guidelines whereas information regarding governance variables is collected from the annual reports of 9 Islamic and 31 conventional banks. Results show Islamic banks are more environmentally friendly compared to their conventional counterparts. Board size is negatively related to green compliance whereas board independence and auditor's type do not have any significant influence on green compliance for both clusters of banks. Compliance with green banking policies enhances the reputation for Islamic banks and accountability and profitability for conventional banks. Results of this study provide useful information for regulatory authorities to formulate policies that are conducive to enhance bank's environmental performance.     

Determinants of efficiency in South East Asian banking

This paper explores the efficiency of banks in five South East Asian countries (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) using the non-parametric data envelopment approach and Tobit regression. The results indicate that efficiency has significantly declined over the period 1998–2004 indicating that the post-1997 crisis restructuring had a negative influence on bank performance. In line with the established literature on emerging markets, foreign banks appear to be more efficient than the domestic counterparts. However, state-owned banks exhibited greater efficiency than their local private sector peers. Among country-level factors, national banking development shows a strong and positive link with bank efficiency. The results are robust to different assumptions of bank inputs, outputs, technological changes, and national banking convergence.     

Effects of communication and financial concerns on banking attitude-behaviour relations

Despite extensive discussion of the concept of Islamic banking, which is based on the fundamental doctrines of Islamic law (Shariah) and Islamic economics (prohibition of interest and profit-loss sharing), few studies have explored the factors that potentially affect behaviour intentions among customers. This study investigates direct and moderating effects of communication and financial factors on customer attitudes and behavioural intentions towards Islamic banking. Data were collected from the customers of Islamic banks and the Islamic banking divisions of conventional banks in Malaysia using online surveys. The hypotheses were tested using hierarchical regression analysis. The results suggest that relationship marketing, informative advertising, perceived benefits, and profit-loss sharing are important determinants of behavioural intentions among both Muslim and non-Muslim customer groups. This study also found moderating effects for most of the conceptualized moderating variables, particularly attitude interactions with informative advertising, ease of online banking, and the principle of profit-loss sharing. There are both notable similarities and differences in the results for the two customer groups. The findings imply that different strategies should be used both to retain existing customers and attract new ones.     

Cross-country comparison of intellectual capital performance of commercial banks in Asian economies

This study explores the intellectual capital performances of commercial banks in eight Asian economies by applying Pulic's value-added intellectual coefficient method (VAIC^?). The results show that after controlling for the influence of loan quality (LQ), fund utilisation (FU), and Asian financial crisis, both physical and human capitals (HCs) are the main factors creating value for banks. From 1996 to 2001, banks in Hong Kong on average had the best intellectual capital performance while those in Thailand improved the most. Further analysis shows that the value-creating efficiency of HC is the major driving force of performance.     

Oiling global capital accumulation: analysing the principles,practices, and geographical distribution of Islamic financial services

This article focuses on the Islamic financial services (IFS) sector, which originated in the Middle East, but is now rapidly becoming a global sector. First, Islamic economic ideology is discussed, which resulted in the foundation of IFS firms after the 1973 oil crisis, and then an overview of the most common IFS is provided. The third part discusses the global distribution of IFS firms and Shari'a compliant assets. The Middle East is at the apex of the IFS sector, with the Islamized economies of Iran and Pakistan and prime hubs such as Manama and Dubai. Outside the Middle East, Malaysia is identified as an important growing market for IFS, while outside the Muslim world, London is increasingly profiling itself as a global IFS hub.     

中国银行业实施巴塞尔Ⅲ：进展与趋势

巴塞尔Ⅲ以资本要求、监管检查、市场约束为三大支柱,主要侧重第一支柱的改革,在重视资本监管的同时,将流动性风险提升到信用风险同等重要的高度;在第二支柱和第三支柱上也有所调整,引入了宏观审慎监管,将其与微观监管手段相结合。中国银行监管当局明确了宏观审慎与微观审慎兼顾、资本监管和流动性监管并重、资本数量和质量同步提高的改革方向,并提出同步推进实施巴塞尔Ⅱ和巴塞尔Ⅲ。2008年金融危机之后,中国宏观经济基本面复苏强劲,为中国银行业顺利推行巴塞尔Ⅲ创造了良好的外部环境,中国银行业在危机中的损失较小、其自身各项经济指标相对稳健也为推行巴塞尔Ⅲ创立了有利的先决条件,但是当前监管工具和银行自身存在的诸多问题仍会影响巴塞尔Ⅲ实施的进程和效果。     

Bank merger and acquisitions activity in the EU: much ado about nothing?

This paper investigates the patterns of consolidation within the European banking industry and examines the efficiency of the banks involved in the merger and acquisitions (M&A) activity to determine whether their performance improved as a result of M&A decisions. The performance of these banks is compared with that of other large banks, which have chosen alternative routes of development. The period covered is 1998 to 2004. The findings suggest that banks involved in M&A activity are more efficient after the M&A or when compared with other large banks. Country-specific characteristics appear to play an important role in explaining the results.     

银行危机传导机制的理论分析

了解传导机制可以为阻断危机蔓延提供科学依据,本文从危机传导的基本内涵入手,分析了银行危机传导的诱因——银行脆弱性,提出金融脆弱性是银行危机传导的根本原因。本文在银行危机传导传统定义的基础上重新界定了该概念,分析了银行危机传导的途径,认为金融脆弱性是银行危机传导的重要媒介,防止银行危机传导的根本措施是提高银行的稳健性。     

Whither Islamic Banking?

Islamic banking is visibly on the rise across the globe, supported by a growing clientele, both Muslim and non‐Muslim, although it has yet to demonstrate that it is a viable alternative to conventional banking. Islamic banking is still under the shadow of conventional banking, not only with products that are strikingly similar to those offered by conventional banks, but also with conventional banks having a strong presence as stakeholders in the Islamic banking industry. Islamic banking is still in the early phase of a presumably long evolutionary process, apparently stuck in the initial phase of product differentiation. Islamic banks are competing with conventional banks rather than among themselves, which does not augur well for innovations and creativity, as it tends to keep them preoccupied with modifications of conventional products with Shari'ah compliance. Islamic banks have arrived at a new crossroads. They could either continue on the same path of what may be termed as ‘head‐on competition’ with conventional banks or change their direction in favour of a ‘niche market’ strategy.     

‘Parasitic invasions’ or sources of good governance: Constraining foreign competition in Hong Kong banking, 1965–81

This paper investigates the operation and impact of the moratorium on new banking licences imposed in Hong Kong in 1965 and the claims that foreign banks destabilised the banking system and drained resources from the colony. First it examines foreign banks' attempts to circumvent the moratorium through claims of special circumstances and buying interests in local banks, and secondly it examines the efforts of incumbents to extend barriers to non-bank financial institutions and to branches of foreign banks. The general conclusions are that while the moratorium was aimed at increasing the stability of the banking system, it had the effect of decreasing the regulatory breadth of the government, and reducing incentives for mergers and acquisitions that might have improved governance.     

Internationalization strategies of emerging market banks: Challenges and opportunities

The greatly improved economic fundamentals of the major emerging economies over the last decade have propelled several emerging banks into the ranks of the world’s largest. Despite their importance in the global economy, the internationalization of emerging market banks remains an understudied phenomenon. This article examines factors that may influence the internationalization strategies of emerging market banks in the private banking sector, both when going abroad (take-off) and upon arrival in a host country (landing). The private banking sector is of significant interest given its importance in many leading financial centers around the world while undergoing major transformation due to the worldwide financial crisis, several recent scandals, and a fast-changing regulatory environment. We highlight the internationalization strategies of two banks from emerging countries, China and Brazil, and their experience in Switzerland’s traditional private banking sector. These two cases highlight factors that may influence successful internationalization such as prior industry experience, existing client base, entry strategy, ownership type, and the liability of foreignness. Our findings offer valuable implications for managers from other emerging economies by providing a better understanding of how emerging market banks expand internationally.     

The Recent Expansion of Foreign Banks in Brazil: First Results

ABSTRACT

Current empirical literature concerning the activities of foreign banks exhibits some degree of consensus around the thesis that foreign banks are less efficient than domestic banks in the case of industrial countries, but that they are more efficient than domestic institutions in emerging economies. The reasons for such phenomena include the exposure to tougher competition in industrial countries, adoption of better management methods, the tendency to develop new products and technologies, and the influence of better-equipped regulators. The paper examines these claims in light of recent Brazilian experience. It is shown that, at least in the case of Brazil, the expansion of foreign bank activities in the domestic markets has not resulted in any major improvement. Operational characteristics are similar for domestic and foreign banks, as are efficiency measures. Technical progress has been introduced by domestic banks, particularly in the fields of automation and online banking, much more intensively than by foreign banks. Balance sheet structures are very similar for both groups, dominated by interfinancial operations and by investment in securities. Thus, there is no evidence that the generally accepted thesis mentioned above applies to Brazil.

RESUMEN. La actual literatura empírica sobre las actividades de los bancos extranjeros muestra un cierto grado de consenso sobre la tesis de que los bancos extranjeros son menos eficientes que los bancos domésticos en el caso de los países industrializados, pero son más eficientes que las instituciones domésticas en las economías emergentes. Las razonas para este fenómeno incluyen la exposición a una competencia mucho más agresiva en los países industriales, la adopción de mejores métodos administrativos, la tendencia de desarrollar nuevos productos y tecnologías, y la influencia ejercida por reguladores mejor equipados. El documento examina estas aseveraciones a la luz de la reciente experiencia brasileña. Queda demostrado que, por lo menos en el caso de Brasil, la expansión de las actividades de los bancos extranjeros en los mercados domésticos no ha resultado en ninguna mejoría considerable. Las características operativas son similares para los bancos domésticos y extranjeros, así como lo son las medidas eficientes. El progreso técnico ha sido introducido por los bancos domésticos, especialmente en el campo de la automación y operaciones bancarias en línea, mucho más intensivamente que por los bancos extranjeros. Las estructuras de los balances son muy similares en ambos grupos, dominados por las operaciones interfinancieras y por la inversión en la bolsa. Por ende, no existe prueba alguna que la supramencionada tesis generalmente aceptada se aplica en el Brasil.

RESUMO. A atual literatura empírica sobre as atividades dos bancos estrangeiros apresenta um certo grau de consenso no que diz respeito à tese de que os bancos estrangeiros são menos eficientes do que os bancos nacionais, no caso de países industrializados, mas que são mais eficientes do que as instituiç[otilde]es nacionais nas economias emergentes. As raz[otilde]es para tal fenômeno incluem a exposição à competição mais intensa em países industrializados, adoção de melhores métodos de gestão, tendência para desenvolver novos produtos e novas tecnologias e a influência de reguladores mais bem equipados. O estudo examina estas raz[otilde]es à luz da recente experiência brasileira, mostrando que, pelo menos no caso do Brasil, a expansão das atividades dos bancos estrangeiros no mercado nacional não resultou em qualquer grande melhoria. As características operacionais são semelhantes nos bancos nacionais e nos estrangeiros, da mesma forma que as medidas de eficiência. O progresso técnico foi introduzido pelos bancos nacionais, particularmente no campo da automação e dos serviços on-line, com mais vigor do que pelos bancos estrangeiros. A estrutura do balanço é bem parecida em ambos os grupos, dominada pelas operaç[otilde]es interbancárias e pelas aplicaç[otilde]es em títulos. Portanto, não há evidência de que a tese mencionada, geralmente aceita, aplica-se ao Brasil.     

外资银行进入对我国银行业竞争度的影响--基于Panzar-Rosse模型的实证研究

1997~2011年这15年间我国银行业处于垄断竞争状态,市场竞争度呈现先减后增的U型变化趋势,而2008年国际金融危机后我国银行业市场竞争度下降。外资银行资产份额与市场竞争程度存在负相关关系,而机构数量与竞争度不相关,外资银行进入未能促进我国银行业的竞争,中国银行业市场逐步发展完善是市场竞争度变化的根本原因。     

Can Islamic banks have their own benchmark?

This paper attempts to answer whether Islamic banks can have their own benchmark rate. In so doing, the paper investigates the nature of the relationship Islamic interbank benchmark rate (IIBR) and its comparable conventional counterpart, London interbank offer rate (LIBOR). The dynamics of the two series are investigated to examine the stability of the spread between IIBR and LIBOR, referred to as ‘Islamic premium’ or ‘piety premium’. The findings suggest that there are both long-term and short-term dynamic relationships between the two rates providing significant evidence of their convergence and co-movement. Our results also show that the existence of the IIBR-LIBOR spread is a reflection of the cost of funding and profit potential of the participating IIBR rate-setters. We find that, in addition to the determinants of the credit spreads, fundamental news of the panel banks are dominant factors driving the ‘piety premium’. We argue that the Islamic banking industry is operating in a global context, where it is highly improbable that its rates can decouple from the global benchmarks. Given that Islamic banking products and their risk return profile are similar to conventional products, arbitrage activities force Islamic rates to converge with the global benchmark rates.