scholarly journals Financial Stability of Islamic and Conventional Banks of the MENA Region: Post and Pre-Crisis of CAMELS Framework

2020 ◽  
Vol 4 (2) ◽  
pp. 38-48
Author(s):  
Joudar Fadoua ◽  
Dinar Brahim
Keyword(s):  
Empirical Evidence ◽  
Financial Stability ◽  
Central Banks ◽  
Financial Ratios ◽  
Subprime Crisis ◽  
Mena Region ◽  
Bank Stability ◽  
Stability Measure ◽  
Conventional Banks

The present study provides new empirical evidence of bank stability measure for 12 Islamic and conventional banks in the MENA region, for a period from 2005 to 2014. The most known method of measuring bank stability is using CAMELS variables; it was adopted by multiple central banks. After calculating financial ratios for the CAMELS framework, we calculate the average for each variable for the two types of banks, for three periods: Pre-crisis 2005-2006, Subprime Crisis 2007-2008, and Post-Crisis 2009-2014, to examine the effect of the crisis on the soundness of Islamic and conventional banks.

Is Islamic bank profitability driven by same forces as conventional banks?

2016 ◽  
Vol 9 (1) ◽  
pp. 46-66 ◽  
Author(s):  
Hajer Zarrouk ◽  
Khoutem Ben Jedidia ◽  
Mouna Moualhi
Keyword(s):  
Dynamic Panel Data ◽  
Islamic Banking ◽  
Subprime Crisis ◽  
Islamic Banks ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Large Sample ◽  
Islamic Bank ◽  
Conventional Banks

Purpose The purpose of this paper is to ascertain whether Islamic bank profitability is driven by same forces as those driving conventional banking in the Middle East and North Africa (MENA) region. Distinguished by its principles in conformity with sharia, Islamic banking is different from conventional banking, which is likely to affect profitability. Design/methodology/approach The paper builds on a dynamic panel data model to identify the banks’ specific determinants and the macroeconomic factors influencing the profitability of a large sample of 51 Islamic banks operating in the MENA region from 1994 to 2012. The system-generalized method of moment estimators are applied. Findings The findings reveal that profitability is positively affected by banks’ cost-effectiveness, asset quality and level of capitalization. The results also indicate that non-financing activities allow Islamic banks to earn higher profits. Islamic banks perform better in environments where the gross domestic product and investment are high. There is evidence of several elements of similarities between determinants of the profitability for Islamic and conventional banks. The inflation rate, however, is negatively associated with Islamic bank profitability. Practical Implications The authors conclude that profitability determinants did not differ significantly between Islamic and conventional banks. Many factors are deemed the same in explaining the profitability of conventional as well as Islamic banks. The findings reported in the current paper might be of interest for policy makers. It is recommended to better implement non-financing activities to improve Islamic bank profitability. Originality/value Unlike the previous empirical research, this empirical investigation assesses the issue whether Islamic banks profitability is influenced by same factors as conventional model. It enriches the literature in this regard by considering the specificities of Islamic banking to identify the determinants of profitability. Moreover, this study considers a large sample (51 Islamic banks) through a different selection of countries/banks than previous studies. In addition, the period of study considers the subprime crisis insofar it ranges from 1994 to 2012. Hence, this broader study allows the authors to draw more consistent conclusions.

scholarly journals Stability in Islamic, conventional, and socially responsible banks: Evidence from MENA countries

2017 ◽  
Vol 14 (2) ◽  
pp. 211-221 ◽  
Author(s):  
Majed Alharthi
Keyword(s):  
Financial Stability ◽  
Fixed Effects ◽  
Least Square ◽  
Islamic Banks ◽  
Fixed Effects Model ◽  
Mena Region ◽  
Socially Responsible ◽  
Mena Countries ◽  
Main Determinants ◽  
Conventional Banks

This study empirically estimates financial stability and its determinants in 40 Islamic banks, 168 conventional banks, and 8 socially responsible banks (SRBs) in MENA region during the period 2005-2012. The dependent variables in this study are capital ratio (equity to total assets) and z-score. The statistical approaches to find the relationship between financial stability indicators and their determinants are ordinary least square (OLS) and fixed effects model FEM). The results suggest that the SRBs are the most stable banks while, Islamic banks are highly risky. Moreover, conventional banks score the minimum capitalisation. The stability in Islamic banks is positively affected by ROA and age. Furthermore, the main determinants of capitalisation in Islamic banks are operating leverage, GDP, and market capitalisation. In conventional banking, size and profitability are important to stability. The capitals have effective associations with lending, ROA, and market development. In SRBs, banks achieve better stability in countries with higher inflation. This study could help bankers, policy makers and economists who focus on MENA region. The coverage of period 2005-2012 could be a limitation and the availability of data for the Islamic and socially responsible banks in MENA area could be another limitation as well.

scholarly journals Impacts of Monetary Policy on Stability of Commercial Banks – Evidence from Vietnam

2021 ◽  
Vol 10 (4) ◽  
pp. 92-103
Author(s):  
Duc Trung Nguyen ◽  
Thi Nhu Quynh Nguyen
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Commercial Banks ◽  
Financial Stability ◽  
Full Employment ◽  
Optimal Level ◽  
Central Banks ◽  
Bank Stability ◽  
High Inflation ◽  
The Stability

Before 2009, most central banks conducted their monetary policy with the ultimate goals of promoting price stability, economic growth and full employment. However, the 2009 financial crisis demonstrated that these goals are not enough to maintain a stable financial arena. So, aside from those objectives, the objective of financial stability is also of interest to central banks when implementing monetary policy. In this study, the authors explore the influence of monetary policy on the stability of commercial banks in Vietnam – an emerging economy. The study uses the dataset of the Vietnamese commercial banks from 2008 to 2019, applying SGMM estimations and checking their robustness with a Bayesian approach. The results show that, in recent years, the SBV has effectively implemented monetary policy to ensure banks’ stability in Vietnam. In particular, money supply M2 has positively impacted the stability of commercial banks. Also, the results imply that the ratio of loan to total assets, the ratio of cost operating to income operating, as well as CPI, correlate negatively with bank stability. The study did not find any impact of bank size or GDP on bank stability during the research period. Based on these results, the SBV should manage an optimal level of money supply M2 to guarantee efficient economic operations in general and maintain bank stability in particular, and should avoid high inflation.

Modern Central Banking

2019 ◽  
pp. 573-601
Author(s):  
Frederic S. Mishkin
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Empirical Evidence ◽  
Financial Stability ◽  
New World ◽  
Central Banks ◽  
Central Banking ◽  
Scientific Principles ◽  
Brave New World ◽  
Almost All

This chapter examines how central banking has evolved in recent decades by looking at two main areas of central bank activities: monetary policy and financial stability policy. It starts by describing a set of nine basic scientific principles derived from theory and empirical evidence that now guide thinking at almost all central banks, which is referred to as the science of central banking. Then the essay discusses how the science of monetary policy provides a framework for understanding central bank governance and how modern central banks conduct monetary and financial stability policies. Central banking has entered a brave new world in which challenges have become greater and the conduct of policy has become more complex.

scholarly journals Does market competition affect all banks equally? Empirical evidence on Montenegro

2021 ◽  
Vol 10 (2) ◽  
pp. 87-107
Author(s):  
Nina Vujanović ◽  
Nikola Fabris
Keyword(s):  
Panel Data ◽  
Credit Risk ◽  
Market Structure ◽  
Empirical Evidence ◽  
Financial Stability ◽  
Banking Sector ◽  
Market Competition ◽  
Market Concentration ◽  
Bank Stability ◽  
Market Shares

Abstract Bank stability is an important aspect of financial stability, especially in bank-centric systems like that of Montenegro. Hence, it is important to analyse risks affecting stability of both the banking and financial system as a whole. Rising competition among banks could pose a challenge and possibly change the level of credit risk, especially if the banks are small in size. This can affect both credit risk and financial stability. Small-sized banks could be the ones to react less nimbly to a changing market structure than bigger banks with stable market shares. This study tries to answer whether competition affects credit risk in Montenegro and whether banks differing in size react differently. Panel data techniques were applied to eleven banks which account for over 90 percent of the banking sector. The results indicate that market concentration could be particularly harmful when it comes to credit risk of small-sized banks, while large-sized banks are less affected. Overall, the increasing competition may positively affect credit risk in Montenegro.

Macroprudential Policy Instruments of Central Banks

2012 ◽  
pp. 32-47
Author(s):  
S. Andryushin ◽  
V. Kuznetsova
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
Policy Instruments ◽  
Central Banks ◽  
Macroprudential Policy ◽  
Policy Studies ◽  
The Future ◽  
Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

What Drives Banking Profitability During Financial Crisis and Political Turmoil? Evidence from the MENA Region

2021 ◽  
pp. 097491012110311
Author(s):  
Salma Zaiane ◽  
Fatma Ben Moussa
Keyword(s):  
Financial Crisis ◽  
Political Instability ◽  
Generalized Method Of Moments ◽  
Bank Performance ◽  
Net Income ◽  
Mena Region ◽  
Factors Affecting ◽  
Mena Countries ◽  
Conventional Banks ◽  
The Impact

The purpose of the study is to identify bank specific, macroeconomic, and stability determinants of both conventional and Islamic bank performance. We also try to identify evidence on the impact of financial crisis and political instability during the Arab Spring (AS) period. The study covers a sample of 123 banks (34 Islamic banks and 89 conventional banks from 13 Middle East and North Africa [MENA] countries) over the period 2000–2013. We use different proxies of performance as dependent variables: return on asset (ROA), return on equity (ROE), net income margin (NIM), and estimate several regressions using the dynamic generalized method of moments. Our results reveal that bank size, asset quality, specialization, and diversification are the major bank specific factors affecting performance of Islamic and conventional banks. Besides, macroeconomic indicators (GDP and inflation) and regulatory quality influence both types of banks differently. Finally, both the financial crisis and political instability negatively affect bank performance.

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