The Good and Bad News about the New Liquidity Rules of Basel III in Islamic Banking of Malaysia

How has Basel III (Bank for International Settlements), regarding the computation, measurement, and management of the liquidity coverage ratio (LCR), vitalized the Islamic banking sector in emerging economies? Vice versa, what is the Islamic banking sector’s capacity to respond in embracing Basel III? This study aims to review the current issues faced by a bank as it discusses the current regulatory guidelines and operational challenges in implementing the system. Based on the implementation of LCR preliminary secondary data of Malaysian banks between 2010 and 2016, this study finds that the readiness of LCR system implementation in the Islamic banking industry is currently low because LCR is still relatively new for all financial institutions and vendors. There is a huge gap between the present system infrastructure of the banks and the LCR model requirements as defined by BNM (Bank Negara Malaysia) under Basel III. Nevertheless, this finding opens new horizons of understanding and practically offers further investigations for the whole banking sector in Malaysia. Thus, policy makers, regulators, and industry players should utilize a unique framework for Islamic banks when strategizing liquidity risk management.

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Impact of Environmental Performance on Financial Performance: Empirical Evidence from Indian Banking Sector

Journal of Technology Management for Growing Economies ◽

10.15415/jtmge.2021.121002 ◽

2021 ◽

Vol 12 (1) ◽

pp. 13-24

Author(s):

Parul Munjal ◽

P. Malarvizhi

Keyword(s):

Financial Performance ◽

Empirical Evidence ◽

Significant Relationship ◽

Environmental Performance ◽

Banking Sector ◽

Secondary Data ◽

Capital Intensity ◽

Environmental Disclosure ◽

Policy Makers ◽

Environmental Practices

There has been long-standing debate over whether or not firms gain economic competiveness from reducing their impact on the environment. Although ample literature is available on association between environmental performance and financial performance across various sectors, little empirical evidence is available in context of Indian banking sector. This research aims to analyze whether there is any significant relationship between environmental performance and financial performance of banks operating in India for a period 2013-14 to 2017-18. Secondary data has been collected for a sample of 83 banks operating in India. Content analysis was applied to extract information about environmental performance disclosed by sample banks followedby construction of environmental disclosure score index. Hierarchical multiple regression was applied to analyze relationship between environmental performance and financial performance after controlling for effects of size, financial leverage and capital intensity. Results exhibit no significant relationship between environmental performance and financial performance of banks operating in India. Findings of this research are expected to provide insight to users and readers of financial statements to have better understanding about the environmental practices carried out by banks. It would also contribute significantly towards decision making for policy makers in Indian banking sector to establish mandatory environmental legislations for reporting on environmental practices in order to improve non financial disclosure and financial performance in Indian banking sector.

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Islamic Financial Inclusion

Growth and Emerging Prospects of International Islamic Banking - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-7998-1611-9.ch009 ◽

2020 ◽

pp. 155-173

Author(s):

S. M. Sohrab Uddin ◽

Mohammad Zoynul Abedin ◽

Nahid Afroz

Keyword(s):

Banking Sector ◽

Financial Inclusion ◽

Islamic Finance ◽

Islamic Banking ◽

Policy Makers ◽

Muslim Population ◽

Muslim Countries ◽

The World ◽

Global Concern ◽

Empirical Contribution

Financial Inclusion (FI), a global concern of this decade, has been accepted by development agencies, governments, and policymakers as one of the pre-eminent ways to eradicate worldwide poverty and income inequality. Consequently, authorities are looking for possible ways to include the unbanked in formal financial chain. Islamic finance, specifically Islamic banking, with its welfare-oriented principles and unique products, has been able to capture the attention of policy makers. Moreover, a major portion of the Muslim population still exclude themselves from the formal financial chain due to religious prohibition of interest-based transactions for whom Islamic finance is the only way to inclusion. Bangladesh, one of the major Muslim countries in the world, is still to bring one-fourth of its total population under formal financial chain. At this backdrop, this chapter examines the empirical contribution of Islamic banking sector in financial inclusion condition as well as development scenario of Bangladesh.

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Perception of stakeholders on governance dimensions of the Islamic banking sector

International Journal of Emerging Markets ◽

10.1108/ijoem-12-2017-0510 ◽

2019 ◽

Vol 14 (4) ◽

pp. 601-619

Author(s):

Ibrahim Abiodun Oladapo ◽

Roshayani Arshad ◽

Ruhaini Muda ◽

Manal Mohammed Hamoudah

Keyword(s):

Banking Sector ◽

Banking System ◽

Simple Random Sampling ◽

Islamic Banking ◽

Policy Makers ◽

Content Type ◽

Stakeholder Groups ◽

Body Of Knowledge ◽

Form Part ◽

Global Growth

Purpose The perception of different stakeholder groups on governance dimensions, such as transparency, accountability and ethics, in the Islamic banking sector is examined, given the global growth of Islamic banking and its purpose of enhancing economic growth and development through Shari’ah-compliant instruments. The purpose of this paper is to determine whether the stakeholders in Nigeria perceive each dimension differently. Design/methodology/approach The data for the study were collected using a survey questionnaire. Simple random sampling was used to select the respondents. The respondents are customers, employees and shareholders of the Islamic banking sector in Nigeria. Findings Findings show that ethics is highly perceived as the key dimension in governance for the Islamic banking sector, whilst a positive and significant relationship is observed between the variables. Based on the variance analysis, there were statistically significant differences in perception between the stakeholders groups in the Islamic banking system. However, similar positive perceptions are accorded towards the overall governance dimensions across stakeholder groups namely, customers, employees and shareholders. Originality/value This study will extend the current body of knowledge in the field of Islamic finance by providing insights into policy makers, operators and regulators of the Islamic banking sector in Nigeria on the prospective stakeholders’ level of perception of the governance dimension, which could form part of the solutions to many contemporary issues in the banking system. This contribution is important, considering the clear relationship among governance dimensions which should be viewed in light of Islamic ideals.

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Meezan Bank: category leader in Islamic banking

Emerald Emerging Markets Case Studies ◽

10.1108/eemcs-11-2016-0213 ◽

2017 ◽

Vol 7 (4) ◽

pp. 1-23

Author(s):

Amber Gul Rashid ◽

Obaid Usmani ◽

Lalarukh Ejaz ◽

Hasan Faraz

Keyword(s):

Banking Sector ◽

Secondary Data ◽

Subject Area ◽

Islamic Banking ◽

Main Theme ◽

Content Type ◽

Documentary Analysis ◽

Doing Business ◽

Long Time ◽

Pros And Cons

Subject area Islamic Banking has been in the limelight since the recession of 2008. Although around for a long time, it is enjoying a renaissance of sorts. This case provides an introduction. Study level/applicability EMBA and/or MBA introduction to banking, senior semester undergraduate, specialization in Islamic Banking. Case overview This case is written in the form of an interview with Meezan Bank, one of the leading financial institutions in the Islamic banking sector. It is based on primary as well as secondary data obtained via interviews and documentary analysis. Expected learning outcomes This is an analytical case and not a decision-making one. The main theme of the case revolves around analysing what Islamic banking is, the challenges that Meezan has faced, the pros and cons of doing business this way and the future issues it can face. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 7: Management Science.

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Basel III LCR Requirement and Banks’ Deposit Funding: Empirical Evidence from Emerging Markets

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2019-0016 ◽

2019 ◽

Vol 8 (2) ◽

pp. 101-128

Author(s):

Tafirei Mashamba ◽

Rabson Magweva

Keyword(s):

Emerging Markets ◽

Banking Sector ◽

Global Financial Crisis ◽

Emerging Market ◽

Basel Iii ◽

Short Term ◽

Liquidity Shocks ◽

Coverage Ratio ◽

Banking Institutions ◽

The Impact

Abstract In December 2010, the Basel Committee on Baking Supervision introduced the liquidity coverage ratio (LCR) standard for banking institutions in response to disturbances that rocked banks during the 2007/08 global financial crisis. The rule is aimed at enhancing banks’ resilience to short term liquidity shocks as it requires banks to hold ample stock of high grade securities. This study attempts to evaluate the impact of the LCR specification on the funding structures of banks in emerging markets by answering the question “Did Basel III LCR requirement induced banks in emerging market economies to increase deposit funding more than they would otherwise do?” The study found that the LCR charge has been effective in persuading banks in emerging markets to garner more stable retail deposits. This response may engender banking sector stability if competition for retail deposits is properly regulated.

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Qualitative Assessment of Basel III Liquidity Standards and its Application in the UAE

Indian Journal of Finance and Banking ◽

10.46281/ijfb.v4i2.765 ◽

2020 ◽

Vol 4 (2) ◽

pp. 118-129

Author(s):

Manoj Kapur ◽

Arindam Banerjee ◽

Kunjana Malik

Keyword(s):

Banking Sector ◽

Financial Statements ◽

Jel Classification ◽

Qualitative Assessment ◽

Basel Iii ◽

Coverage Ratio ◽

Disclosure Requirements ◽

Short And Long Term ◽

Made In

The Basel Committee for Banking and Supervision (BCBS) introduced two key liquidity ratios to strengthen the short- and long-term liquidity positions of the banks around the globe. These ratios were designed to achieve two key distinct objectives. Firstly, to encourage banks' short-term resilience to the liquidity risks by ensuring there are sufficient high-quality liquid assets to survive a significant stress which may last for 30 days. Calculation of this ratio is called as Liquidity Coverage Ratio (LCR). Secondly, to promote bank resilience over a longer time horizon, at least annually, by creating additional incentives for banks to fund their activities with more stable sources of funding. This led to creation of Net Stable Funding Ratio (NSFR). While these structural ratios are mostly quantitative, the underlying factors that are needed to calculate these ratios include qualitative factors as well. The paper analyzed the implementation of Basel III standards for the banking sector in the UAE. In particular, the timelines specified by the Central bank of the UAE and its implementation by the Domestic-Systemically Important Banks (D-SIBs) in the UAE was tracked by this paper. The study found a disconnect between the disclosure requirements by Basel III and disclosure made in the published annual financial statements of the banks. The study also discussed the extent of disclosures made by the D-SIBs and how relevant disclosures may improve the transparency of the liquidity risk management of the bank. JEL Classification Codes: E58, G32, G38.

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Studi Empiris Kekuatan Stabilitas Keuangan Perbankan Syariah di Indonesia

Jurnal Ekonomi Bisnis dan Kewirausahaan ◽

10.26418/jebik.v8i2.28015 ◽

2019 ◽

Vol 8 (2) ◽

pp. 147

Author(s):

Elok Heniwati

Keyword(s):

Banking Sector ◽

Global Financial Crisis ◽

Stock Exchange ◽

Secondary Data ◽

Annual Reports ◽

Islamic Banking ◽

Insolvency Risk ◽

Conventional Banks ◽

The Stability ◽

The Global Financial Crisis

The study aims to examine the stability of Islamic banking in Indonesia after the global financial crisis. This study is significant, considering the rapidly growth of Islamic banking in Indonesia and uniqueness of its operating systems and products. By using secondary data from the annual reports of the banking sector listed on the Indonesia Stock Exchange (IDX) for the period from 2013 to 2016, regression analysis with the ZSCORE function (insolvency risk) as the dependent variable and a number of predictor variables (firm-specific, macroeconomic and governance) are used as tools for achieving research objectives. To check the robustness of the research findings, a model with different specifications has been used. The results indicate that profitability and firm size have a significant influence on the insolvency risk (ZSCORE) of banks and empirical factors that influence these risks differ between Islamic banks and conventional banks.

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Islamic Financial Inclusion

Research Anthology on Personal Finance and Improving Financial Literacy ◽

10.4018/978-1-7998-8049-3.ch017 ◽

2021 ◽

pp. 292-310

Author(s):

S. M. Sohrab Uddin ◽

Mohammad Zoynul Abedin ◽

Nahid Afroz

Keyword(s):

Banking Sector ◽

Financial Inclusion ◽

Islamic Finance ◽

Islamic Banking ◽

Policy Makers ◽

Muslim Population ◽

Muslim Countries ◽

The World ◽

Global Concern ◽

Empirical Contribution

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Tier 2 Capital Instruments under Basel III: A Sharīʿah Viewpoint

Arab Law Quarterly ◽

10.1163/15730255-12320023 ◽

2018 ◽

Vol 32 (3) ◽

pp. 205-241

Author(s):

Madaa Munjid Mustafa ◽

Beebee Salma Sairally ◽

Marjan Muhammad

Keyword(s):

Secondary Data ◽

Islamic Banking ◽

Basel Iii ◽

Tier 2 ◽

Regulatory Capital ◽

Regulatory Requirements ◽

Library Research ◽

Islamic Jurisprudence ◽

Banking Institutions

Abstract Basel III has redefined the criteria for regulatory capital instruments. Accordingly, Islamic banking institutions (IBIs) have to consider the issuance of instruments that would meet both the objectives of Basel III and Sharīʿah requirements. This research particularly aims to compare the regulatory requirements for issuing Tier-2 (T2) capital instruments as defined by Basel III, Bank Negara Malaysia (BNM) and IFSB-15. In this regard, the research examines the Sharīʿah issues related to subordination and conversion arising in exchange-based contracts (such as murābaḥah and iǧārah ṣukūk) and equity-based contracts (such as muḍārabah and wakālah ṣukūk). The study relies on library research to collect secondary data in the form of classical works of Islamic jurisprudence, analyses such work and links it with the present day regulatory requirements. The study finds that there are Sharīʿah concerns over the use of exchange-based contracts. However, the use of convertible muḍārabah and wakālah ṣukūk could be justified.

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BASEL III LIQUIDITY RISK AND KOSOVO BANKING SYSTEM

Knowledge International Journal ◽

10.35120/kij34051329l ◽

2019 ◽

Vol 34 (5) ◽

pp. 1329-1335

Author(s):

Hysen Lajqi

Keyword(s):

European Union ◽

Banking Sector ◽

Financial System ◽

Liquidity Risk ◽

Capital Requirements ◽

Basel Iii ◽

Bank Capital ◽

The European Union ◽

Coverage Ratio ◽

Basel Committee

The financial crisis 2007-2009 prompted the Basel Committee on Banking Supervision (BCBS) to intensify its efforts to strengthen the principles and standards for capital, as well as for the measurement and management of liquidity risk. Risk management is very important in the financial system, especially in banks. Among various risks Banks face is a liquidity risk it’s managing enables Banks to fulfil their obligationsBasel III consists of set of measures internally agreed. The implementation of Basel III will considerably increase the quality of banks' capital and significantly raise the required level of their capital. In addition, it will provide a "macro prudential overlay" to better deal with systemic risk.Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.To ensure that banks have sufficient liquidity to survive potential liquidity shocks, as happened few years ago, the Basel Committee has issued two new globally revised minimum standards under the Basel III rules for the first time in the banking history: LCR – Liquidity Coverage Ratio and NSFR – Net Stable Funding Ratio that contain new requirements for bank capital, as well as standardized rules in the liquidity area.Banks need to fully comply with LCR and NSFR rules by January 1, 2019, according to the Capital Requirements Directive & Capital Requirements Regulation (CRD IV & CRR) rules.Basel III rules, in the European Union attain their applicable judicial form through REGULATION (EU) No 575/2013. The regulatory package is due to enter into force on January 1st, 2014, but some provisions will be implemented gradually between 2014 and 2019 and will fully come into force on January 1st, 2019. But these rules are likely to undergo some revisions due to a proposal by European Union (EU), so implementation horizon could go being beyond 2019.Performance of the Kosovo banking sector continued to be positive, thus contributing in maintaining the financial and economic stability of the country. Kosovo’s financial system continues to be characterized with sustainable increase in all its constituent sectors. The banking sector in Kosovo as most successful story is developed by many international institutions, characterized by a large presence of foreign capital, where 89. 2% of all assets are managed by foreign banks and development is based on international standards.Banking sector continued to have good liquidity position, with the main liquidity indicators standing above the minimal level as a required by the regulation.The implementation of Basel III rules in Kosovo related to liquidity depends on the local regulator and Basel III standards.

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