scholarly journals Credit Rating Strategies: A Study of GCC Banks

SAGE Open ◽  
2020 ◽  
Vol 10 (4) ◽  
pp. 215824402098229
Author(s):  
Y. Sree Rama Murthy ◽  
Saeed Al-Muharrami
Keyword(s):  
Financial Crisis ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Focal Point ◽  
Credit Ratings ◽  
Islamic Banks ◽  
Before And After ◽  
Capital Ratios ◽  
Financial Strategies ◽  
Conventional Banks

Identifying financial strategies, which help a bank to survive a crisis, is the main purpose of the article. Low oil prices and the COVID-19 pandemic is the latest crisis being faced by the Gulf Cooperation Council (GCC) banks. This article examines the financial strategies of those banks that managed to retain good credit ratings both before and after the global financial crisis, so as to throw light on the characteristics of banks that managed to remain steady and stable. This article analyzes the Fitch credit ratings of 51 Islamic and conventional banks, operating in the GCC, divided into pre–global financial crisis (2002–2007) and post–global financial crisis (2008–2013) periods. Trend and behavior of average ratios of top-rated banks in both the periods is first attempted before moving to the “Ordered Choice Logit” regression method to further analyze the data. Regression results indicate that size and cost management are very important factors in ratings both before and after the financial crisis. As long as asset quality is under control, liquidity is the focal point in achieving good ratings. Top-rated Islamic banks seem to be following a strategy of allowing capital ratios to trend down during a crisis as long as capital is well above the regulatory requirements. The article is the first of its kind, which examines credit rating strategies of GCC Islamic banks and conventional banks. The findings of the article are useful for banks as they throw light on appropriate strategies to be adopted by banks during crises.

scholarly journals Credit Rating Strategies: A Study of GCC Banks

2020 ◽  
Author(s):  
Y. Sree Rama Murthy ◽  
Saeed Al-Muharrami
Keyword(s):  
Financial Crisis ◽  
Commercial Banks ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Focal Point ◽  
Credit Ratings ◽  
Islamic Banks ◽  
Before And After ◽  
Capital Ratios ◽  
Financial Strategies

<p><b>Purpose</b></p> <p>It is difficult to predict when the next financial crisis will happen. Identifying financial strategies, which help a bank to survive a crisis, is the main purpose of the paper. This paper examines the financial strategies of those banks, which managed to retain good credit ratings both before and after the global financial crisis, so as to throw light on the characteristics of banks which managed to remain steady and stable. </p> Design <p>This paper analyses Fitch credit ratings of 51 banks Islamic and commercial banks operating in GCC, divided into pre global financial crisis (2002 to 2007) and post global financial crisis (2008 to 2013) periods. Trend and behavior of average ratios of top rated banks in both the periods is first attempted before moving to “Ordered Choice Logit” regression method to further analyze the data. </p> <p><b>Findings</b></p> <p>Size and cost management are very important factors in ratings, both before and after the financial crisis. As long as asset quality is under control, liquidity is the focal point in achieving good ratings. Top rated Islamic banks seem to be following a strategy of allowing capital ratios to trend down during a crisis as long as capital is well above the regulatory requirements. </p> <p><b>Originality and Value</b></p> <p>The paper is the first of its kind which examines credit rating strategies of Islamic banks as well as commercial banks. <a>The findings of the paper are extremely important for banks as they throw light on appropriate strategies to be adopted by banks during crises.</a></p>

scholarly journals Credit Rating Strategies: A Study of GCC Banks

2020 ◽  
Author(s):  
Y. Sree Rama Murthy ◽  
Saeed Al-Muharrami
Keyword(s):  
Financial Crisis ◽  
Commercial Banks ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Focal Point ◽  
Credit Ratings ◽  
Islamic Banks ◽  
Before And After ◽  
Capital Ratios ◽  
Financial Strategies

<p><b>Purpose</b></p> <p>It is difficult to predict when the next financial crisis will happen. Identifying financial strategies, which help a bank to survive a crisis, is the main purpose of the paper. This paper examines the financial strategies of those banks, which managed to retain good credit ratings both before and after the global financial crisis, so as to throw light on the characteristics of banks which managed to remain steady and stable. </p> Design <p>This paper analyses Fitch credit ratings of 51 banks Islamic and commercial banks operating in GCC, divided into pre global financial crisis (2002 to 2007) and post global financial crisis (2008 to 2013) periods. Trend and behavior of average ratios of top rated banks in both the periods is first attempted before moving to “Ordered Choice Logit” regression method to further analyze the data. </p> <p><b>Findings</b></p> <p>Size and cost management are very important factors in ratings, both before and after the financial crisis. As long as asset quality is under control, liquidity is the focal point in achieving good ratings. Top rated Islamic banks seem to be following a strategy of allowing capital ratios to trend down during a crisis as long as capital is well above the regulatory requirements. </p> <p><b>Originality and Value</b></p> <p>The paper is the first of its kind which examines credit rating strategies of Islamic banks as well as commercial banks. <a>The findings of the paper are extremely important for banks as they throw light on appropriate strategies to be adopted by banks during crises.</a></p>

scholarly journals Effects of the Global Financial Crisis on the Agency Cost of Islamic Banks and Conventional Banks

2017 ◽  
Vol 4 (1) ◽  
pp. 44
Author(s):  
Talla M Aldeehani
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Gulf Cooperation Council ◽  
Agency Cost ◽  
Islamic Banks ◽  
Empirical Testing ◽  
Before And After ◽  
The Status ◽  
Conventional Banks ◽  
The Global Financial Crisis

In this paper, we investigate the effect of the 2008 global financial crisis on the agency cost (AC) of Islamic banks (IBs) and conventional banks (CBs). Many pioneering scholars (see, for example, Archer et al., 1998) have recognized fundamental differences in the capital structures and risks of IBs compared to CBs and called for more empirical testing of these issues. This effort is in response to those calls. Focusing on AC, we collected data for all Gulf Cooperation Council (GCC) banks satisfying the period from 2001-2014. The data was split into “before” and “after” the 2008 crisis. Although statistically insignificant, the analysis shows higher AC for IB compared to CBs before and after the crisis. However, we provide evidence of significant differences in AC causal models for the two types of banks. For conventional banks, only profitability factors explain variability in AC before and after the crisis. For Islamic banks, however, in addition to profitability, liquidity, deposits and financing facilities matter depending on the status of the economy. We provide further discussions, implications, and recommendations.

Islamic Banking in GCC

2020 ◽  
pp. 1-16
Author(s):  
Eda Orhun
Keyword(s):  
Financial Crisis ◽  
Literature Review ◽  
Performance Comparison ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Financial Products ◽  
Gcc Countries ◽  
Before And After ◽  
Time Periods ◽  
Conventional Banks

This chapter offers a literature review discussing the origin, history, and the growth of Islamic Banking, especially in the GCC countries. It provides detailed information regarding how Islamic Banking evolved throughout the years and what are the current Islamic financial products. Another interesting topic covered in this literature review is the performance comparison of Islamic and conventional banks during different time periods. Accordingly, the chapter explores how the financial standing of Islamic banks altered in comparison to conventional banks before and after the financial crisis of 2008 by presenting earlier studies from various countries. It is concluded that some potential challenges and future opportunities of the Islamic Banking are yet to be explored.

scholarly journals Doing Good or Avoiding Evil? An Explorative Study of Depositors’ Reasons for Choosing Social Banks in the Pre and Post Crisis Eras

2020 ◽  
Vol 12 (23) ◽  
pp. 10082 ◽  
Author(s):  
Nikolas Höhnke
Keyword(s):  
Financial Crisis ◽  
Online Survey ◽  
Global Financial Crisis ◽  
Target Groups ◽  
The Social ◽  
Before And After ◽  
Great Relevance ◽  
Conventional Banks ◽  
The Individual ◽  
The Global Financial Crisis

The global financial crisis is expected to be of great relevance for social banks’ growth of deposits. However, it is still unclear why depositors choose social banks in general, and how the global financial crisis has affected depositors’ choice of social banks. The present paper thus explores a comprehensive set of reasons for choosing social banks, the individual relevance of reasons, as well as differences before and after the global financial crisis. Data was collected through a survey of five social banks, interviews with nine industry experts, and an online survey with 108 social and 413 conventional depositors. Using content analysis, a multi-level system of reasons for choosing social banks was identified, which refers to the social banks’ “good” and conventional banks’ “evil” characteristics. Based on a frequency analysis of codings per category, reasons with potential superior relevance for depositors’ decision-making were explored. A comparison with reasons for choosing conventional banks imply that depositors’ reasons for choosing social banks differ from those for choosing conventional banks in general. The results also indicate that the global financial crisis might have helped social banks’ growth by attracting new customer target groups, who chose social banks because of conventional banks’ “evil” characteristics.

COMPARATIVE TFP GROWTH BETWEEN GCC CONVENTIONAL AND ISLAMIC BANKS BEFORE AND AFTER THE 2008 FINANCIAL CRISIS

2020 ◽  
pp. 1-20
Author(s):  
AZZEDDINE AZZAM ◽  
BELAID RETTAB
Keyword(s):  
Financial Crisis ◽  
Technical Change ◽  
Islamic Banks ◽  
2008 Financial Crisis ◽  
Before And After ◽  
Product And Process Innovation ◽  
Product And Process ◽  
The 2008 Financial Crisis ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

This paper measures and compares the performance of GCC conventional and Islamic banks in terms of total factor productivity growth (TFPG) before and after the 2008 financial crisis. The sources of TFPG are technical change, size economies, and observed asset growth. Technical change and size economies are measured by estimating a translog cost function and factor share equations. Results show that Islamic banks outperformed conventional banks overall and across different sizes. To the extent that product and process innovation improves TFPG, Islamic banks have weathered the 2008 financial crisis by being more innovative than conventional banks.

scholarly journals Financial System Stability in Indonesia during The Global Financial Crisis 2007/2008: Conventional vis-à-vis Islamic

2015 ◽  
Vol 2 (2) ◽  
pp. 136
Author(s):  
Muh. Rudi Nugroho ◽  
Ibnu Qizam
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Internal Variable ◽  
Islamic Banks ◽  
Z Score ◽  
Internal Factors ◽  
Macroeconomic Factors ◽  
Conventional Banks ◽  
The Global Financial Crisis

This research aims to analyze the financial stability especially in dual banking system in Indonesia and discusses the role of Islamic banks in the financial stability of national banks. In addition, this study also focuses on the analysis of the determinants of financial stability namely on the national banking Industry. This research uses panel data in which combined data between time series and cross section with an observation periods are 2005:1 - 2009:1 by using an internal variable of banks and macroeconomic data. Z-score analysis will be used as main tool analysis regressed with internal variable. Empirical results obtained from this research shows that during the period of 2005:1 - 2009:1 banking financial stability, for both conventional and Islamic and categorized based on an asset scale, the movement of the Z-score value is different. From the Z-score values analysis shows that Islamic banks are the most stable bank with a trend increased sharply when compared with other banks, namely conventional couterparts. If viewed from each category, small conventional banks more stable than small Islamic banks, and there are declining trend in 2005:1 to 2009:1. Whereas for large and middle conventional banks the trend of the Z-score movement are in the same patterns. This study also founds that the determinant of the banking stability can be seen from two sides namely bank's internal factors and macroeconomic factors. Internal factors consist of: Income Diversity (ID), Credit or Financing (Loan), Total Assets (TA), Operational Cost (Cost), Cost Income (CI), Loan Asset (LA), Current Liability (CL), Cash to Current Liabilities (CCL), Capital Bank (MDL). While macroeconomic factors consist of: inflation, BI Rate, Exchange Rate, Composite Index (JCI), the Gross Domestic Product (GDP). This research also examined the extent to which the role of Islamic banks and the global financial crisis to the financial stability of national banking. This analysis shows that the global financial crisis and Islamic banks affect significantly to the financial stability of banking industries in Indonesia.

Productivity of Islamic and Conventional Banks in Malaysia –During the Pre and Post Global Financial Crisis

2019 ◽  
Vol 16 (2) ◽  
pp. 86-95
Author(s):  
Muhamad Azhari Wahid ◽  
Mohd Shukor Harun
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Malmquist Productivity Index ◽  
Productivity Index ◽  
Productivity Change ◽  
Islamic Banks ◽  
Productivity Level ◽  
Negative Effect ◽  
Conventional Banks

The global financial crisis has evidenced sluggish progress in the growth of Malaysian banking sector’s assets, deposits, and loans. The scenario could have affMalmquist Productivity Indexected the productivity of Malaysian banks which consists of Islamic and conventional banks. This study aims to evaluate and distinguish the productivity change of 17 Malaysian Islamic banks and 21 conventional banks during the pre and post global financial crisis. To estimate total productivity change of both type of banks, this study employs the Malmquist Productivity Index (MPI) method. In calculating the MPI, the study considers total deposits, personnel expenses and fixed assets as the inputs while for the outputs, the study considers loans, investment and non-interest income. The empirical results reveal that the Islamic and conventional banks have been productive throughout the period of observation. However, the results pointed out that Islamic banks have been more productive than its conventional counterparts. Interestingly, the study indicates that both Islamic and conventional banks have failed to operate at an optimal scale of operations. This could have negative effect on the productivity level of these banks. Furthermore, the recent global financial crisis has negative impact on the productivity level of Islamic and conventional banks in Malaysia.

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