scholarly journals Islamic Bank Safety Net Issues: The Regulatory Challenges for Cross Border Islamic Banking Transactions

2020 ◽  
Vol 4 (2) ◽  
pp. 20-31
Author(s):  
Abul Bashar Bhuiyan ◽  
K. M. Anwarul Islam ◽  
Abd Halim Mohd Noor ◽  
Mohammad Solaiman ◽  
Mohammad Abdur Rahman
Keyword(s):  
Banking Sector ◽  
Safety Net ◽  
Jel Classification ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Central Bank Intervention ◽  
Cross Border ◽  
Islamic Bank ◽  
The Right ◽  
Regulatory Challenges

This paper aims to identify major regulatory challenges in the safety net for providing insurances to the depositors in the cross-border transaction over the world. The study found that Islamic banking is facing major challenges to issue appropriate rules and regulations for providing the right safety against the deposit of customers with a conventional counterpart base on the Islamic shariah principles. Especially in the area of “chartering or licensing function, prudential regulation and supervision, deposits in the central bank, intervention and resolution mechanisms and capital adequacy standard” for safety net issues of Islamic Bank. The study recommended that the policymakers need to pay heed in a deliberate and intentional way to solve the above regulatory issues to face the existing challenges for the smooth operation and bright prospect of the Islamic Banking sector in the future. JEL Classification Codes: G21, G24, L26, P51.

scholarly journals THE ISSUES AND CHALLENGES OF SHARIAH HARMONIZATION OF THE CROSS BORDER TRANSACTIOINS: CONCEPTUAL REVIEW OF ISLAMIC BANKING INDUSTRIES

2020 ◽  
Vol 3 (2) ◽  
pp. 1-9
Author(s):  
Abul Bashar Bhuiyan ◽  
Md. Jafor Ali ◽  
K. M. Anwarul Islam ◽  
Md. Shahbub Alam ◽  
Mohammad Solaiman
Keyword(s):  
Jel Classification ◽  
Global Markets ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Market Demand ◽  
Cross Border ◽  
The Common ◽  
The Cross ◽  
Conventional Counterpart ◽  
Regulatory Challenges

The paper aims to identify major’s regulatory challenges are facing in maintaining proper harmonization of Shariah rulings of Islamic Bank across the world in the cross-border activities. The study found that the Islamic banking is confronting challenges to make appropriate rules and regulations for making the common standardized mode of finance to cope up with present market demand for their customer with conventional counterpart base on the Islamic sharia principles. Particularly, in the arena of competing in the global markets and establish unique regulatory institutions for proper harmonization of Shariah rulings of Islamic Banks over the cosmos in the cross-border actions. The study recommends that policymakers are to pay attention to solve the above regulatory issues to face the existing challenges for the smooth financial operation in the future. JEL Classification Codes: G21, G24, L26, P51.

scholarly journals Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013

2015 ◽  
Vol 17 (3) ◽  
pp. 279 ◽  
Author(s):  
Ousmane Diallo ◽  
Tettet Fitrijanti ◽  
Nanny Dewi Tanzil
Keyword(s):  
Credit Risk ◽  
Causal Relationship ◽  
Risk Sharing ◽  
Banking Sector ◽  
Panel Data Analysis ◽  
Banking System ◽  
Liquidity Risk ◽  
Operational Risk ◽  
Islamic Banking ◽  
Islamic Bank

The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk sharing” system.

Islamic bank rent

2014 ◽  
Vol 7 (2) ◽  
pp. 170-181 ◽  
Author(s):  
Yasushi Suzuki ◽  
S.M. Sohrab Uddin
Keyword(s):  
Empirical Evidence ◽  
Banking Sector ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Islamic Bank ◽  
Franchise Value ◽  
Conventional Banks ◽  
First Time ◽  
Rent Theory

Purpose – This paper aims to draw on the bank rent approach to evaluate the existing pattern of financing of Islamic banks and to propose a fairly new conceptualization of Islamic bank rent. Design/methodology/approach – The bank rent theory is adopted to generate the theoretical underpinnings of the issue. After that, empirical evidence from the banking sector of Bangladesh is used to support the arguments. Findings – Repeated transactions under murabaha are observed in the Islamic banking sector of Bangladesh. The asset-based financing gives the Bangladeshi Islamic banks relatively higher Islamic bank rent opportunity for protecting their “franchise value” as Shari’ah-compliant lenders, while responding to the periodic volatility in transaction costs of profit-and-loss sharing. Research limitations/implications – The bank rent approach suggests that the murabaha syndrome can be ironically justifiable. On the other hand, the current profit-and-loss sharing risk provides an idea of the difficulty in assuming the participatory financing with higher credit risk in practice. Islamic scholars and the regulatory authority need to design an appropriate financial architecture which can create different levels of rent opportunities for Islamic banks to avail the benefit from the variety of Islamic financing as declared by Islamic Shari’ah. Originality/value – This paper introduces a fairly new concept of “Islamic bank rent” to make sense of the murabaha syndrome. This approach also contributes to clarifying the unique risk and cost to be compensated with the spreads that Islamic banks are expected to earn. To draw empirical evidence, as far as it could be ascertained, the data of both Islamic banks and conventional banks with Islamic banking windows/branches are used for the first time.

scholarly journals Analysis on Corporate Governance Influences toward Banking Efficiency with Bank Category as Moderator Variable

2015 ◽  
Vol 6 (1) ◽  
pp. 127 ◽  
Author(s):  
Lidiyawati Lidiyawati
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Islamic Law ◽  
Financial Institution ◽  
Supervisory Board ◽  
Islamic Banking ◽  
Moderator Variable ◽  
Islamic Bank ◽  
Data Limitations ◽  
Conventional Bank

Corporate governance system of Sharia financial institution that based on Islamic law may result more  variables principles then conventional owns. The restriction of usury are highly speculative transaction, embedded prohibited matter are main features in Sharia business institution. Sharia Supervisory Board, as board that supervises banking practices conforms to Sharia stipulations, hold strong important role within Islamic banking. Both important points above had direct effects on efficiency which attained by Islamic banking compared with conventional banking. This study examines the influence of corporate governance implementation toward efficiency banking sector with bank category as moderator variable. This study hypothesize that corporate governance has significant influences toward bank’s efficiencies, the influence of corporate governance toward Islamic bank efficiencies is higher than conventional bank, and level of Islamicbank efficiencies is higher than conventional bank. Measurement of efficiencies is using Stochastic Frontier Approach program, and then using SPSS in procces hypothetical model. The results of the study do not support the hypothesis. Examined result shows that statically corporate governance is not influenced by bank efficiency achievement. Corporate governance influences over Islamic bank has not show higher significance than conventional and Islamic bank efficiencies remain steady. Data limitations, complexity of the efficiency measures and the complexity of the operation of Islamic banks may explain the finding.

scholarly journals Cross-border banking and foreign branch regulation in Europe

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lucia Gibilaro ◽  
Gianluca Mattarocci
Keyword(s):  
Banking Sector ◽  
Foreign Bank ◽  
Capital Adequacy ◽  
Foreign Banks ◽  
European Economic Area ◽  
The European Union ◽  
Content Type ◽  
Cross Border ◽  
European Banking

Purpose This paper aims to examine the relevance of cross-border activity in the European banking sector, evaluating the role of differences in regulation to explain the level of interest in entering foreign markets. Design/methodology/approach The sample considers all banks in the European Union (EU 28) existing at year-end 2017, and information about the ultimate owners’ nationality to classify local and foreign banks is collected. The analysis provides a mapping of regulatory restrictions for foreign banks and evaluates how they impact the role of foreign players in the deposit and lending markets. Findings Results show that the lower are the capital adequacy requirements, the higher are the amounts of loans and deposits offered by non-European Economic Area banks and, additionally, the higher the probability of having a foreign bank operating in the country. Originality/value This paper provides new evidence on regulatory arbitrage opportunities in the EU and outlines differences among EU countries not previously studied.

scholarly journals PENGARUH INTELLECTUAL CAPITAL STRUKTUR MODAL DAN TINGKAT INFLASI TERHADAP KINERJA KEUANGAN PERBANKAN SYARIAH DI INDONESIA

Media Ekonomi ◽  
2017 ◽  
Vol 25 (1) ◽  
pp. 25
Author(s):  
Putri Indriani ◽  
Nirdukita Ratnawati
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Value Added ◽  
Regression Method ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Islamic Bank ◽  
Capital Adequacy Ratio ◽  
The Relationship

<em>The purpose of this study was to analyze the relationship and the influence of Value Added Intellectual Capital (VAIC) and Structure of capital as measured by Capital Adequacy Ratio (CAR) and The Rate of Inflation on financial performance Islamic Banking. <em>The method used in this study is the regression method panel. The data used in this study were taken from the nine Islamic Bank in Indonesia Indonesian period 2010-2015.</em> <em>Results of the study showed inflasi have positively to financial performance and CAR have negatively to financial performance. If seen from the results an VAIC on financial performance have the positively significant results at Islamic bank in Indonesia .</em><br /></em>

Ethical consideration of Islamic banks in Pakistan: an empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fatima Khaleel ◽  
Pervez Zamurrad Janjua ◽  
Mumtaz Ahmed
Keyword(s):  
Banking Sector ◽  
Annual Reports ◽  
Survey Method ◽  
Future Research ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Ethical Values ◽  
Content Type ◽  
Islamic Bank ◽  
Finance Ethics

Purpose The purpose of this paper is threefold. First, it assesses communicated (information disclosed in annual reports and websites) ethical values of Islamic banks (IBs) by using an index based on Islamic precept. Second, this research paper analyzes the perception of employees working in IBs of Pakistan regarding previously mentioned dimensions constructed in the form of index. Third, it explores the difference (if any) between communicated and perceived ethical values of IBs in Pakistan. Design/methodology/approach This study incorporated two research methods, namely, content analysis (qualitative method) and descriptive analysis (quantitative method) to assess communicated and perceived ethical values. A checklist was designed that includes total six dimensions with 106 items or constructs. For perceived ethics, survey method is used to explore how far in practice IBs are operating in line with Islamic finance ethics in Pakistan by distributing questionnaires among employees. Findings This research study revealed overall satisfactory communicated and perceived ethical values in IBs of Pakistan. It is generally concluded that Meezan Bank is doing well in all dimensions as compare to other three banks in Pakistan. Some banks such as Dubai Islamic Bank and Albaraka Islamic bank lack proper format of annual reports. It recommended proper training and development of employees particularly about Islamic banking products and procedure. Moreover, it is recommended to take initiative of attracting female segment of the society and environment protection related campaigns. Research limitations/implications Because of data and time constraints, an extended beneficiary analysis could not be materialized in this study. Therefore, for future research, it is recommended to expand the stakeholders’ analysis beyond employees of IBs. Practical implications This study may be helpful for policymakers and other stakeholders to improve the image and for further growth of IBs in Pakistan. Social implications This study is the part of corporate social responsibility, so it will add value to social norms of banking sector and provide different dimensions and constructs based on Islamic ethical and moral system. It highlights banker’s responsibilities toward society. Originality/value This paper supports the phenomena of Islamic banking and finance in emerging markets and shows its potential growth for the economy.

Data mining techniques for predicting the financial performance of Islamic banking in Indonesia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammed Ayoub Ledhem
Keyword(s):  
Data Mining ◽  
Financial Performance ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Future Research ◽  
Islamic Banking ◽  
Accuracy Score ◽  
Content Type ◽  
Data Mining Techniques ◽  
Using Data

Purpose The purpose of this paper is to apply various data mining techniques for predicting the financial performance of Islamic banking in Indonesia through the main exogenous determinants of profitability by choosing the best data mining technique based on the criteria of the highest accuracy score of testing and training. Design/methodology/approach This paper used data mining techniques to predict the financial performance of Islamic banking by applying all of LASSO regression, random forest (RF), artificial neural networks and k-nearest neighbor (KNN) over monthly data sets of all the full-fledged Islamic banks working in Indonesia from January 2011 until March 2020. This study used return on assets as a real measurement of financial performance, whereas the capital adequacy ratio, asset quality and liquidity management were used as exogenous determinants of financial performance. Findings The experimental results showed that the optimal task for predicting the financial performance of Islamic banking in Indonesia is the KNN technique, which affords the best-predicting accuracy, and gives the optimal knowledge from the financial performance of Islamic banking determinants in Indonesia. As well, the RF provides closer values to the optimal accuracy of the KNN, which makes it another robust technique in predicting the financial performance of Islamic banking. Research limitations/implications This paper restricted modeling the financial performance of Islamic banking to profitability through the main determinants of return of assets in Indonesia. Future research could consider enlarging the modeling of financial performance using other models such as CAMELS and Z-Score to predict the financial performance of Islamic banking under data mining techniques. Practical implications Owing to the lack of using data mining techniques in the Islamic banking sector, this paper would fill the literature gap by providing new effective techniques for predicting financial performance in the Islamic banking sector using data mining approaches, which can be efficient tools in business and management modeling for financial researchers and decision-makers in the Islamic banking sector. Originality/value According to the author’s knowledge, this paper is the first that provides data mining techniques for predicting the financial performance of the Islamic banking sector in Indonesia.

Analysis of Islamic Banking Efficiency Using Maqashid Shariah Approach (Study on Islamic Banks in Indonesia and Malaysia)

2017 ◽  
Vol 2 (4) ◽  
pp. 01-07
Author(s):  
Novi Puspitasari ◽  
Devi Hardiyanti Rukmana ◽  
Hari Sukarno
Keyword(s):  
Maximum Level ◽  
Jel Classification ◽  
Maximum Efficiency ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Banking Efficiency ◽  
Islamic Bank ◽  
Result Show ◽  
Using Data ◽  
Research Period

Objective - This research aims to analyse the efficiency of Islamic banking in Indonesia and Malaysia based on the maqashid shariah approach. Methodology/Technique - This research uses individual education, creation of justice, and achievement of welfare to measure the efficiency variable. The research period covers the period from 2011 to 2015, using data envelope analysis (DEA). Findings - The result show that there are three (3) Islamic banks that achieve maximum efficiency in Malaysia. These are: Affin Islamic Bank Berhad, which achieved maximum efficiency in terms of distribution and profitability output, CIMB Islamic Bank, which achieved maximum efficiency in terms of distribution output, and RHB Islamic Bank Berhad, which achieved maximum efficiency in terms of distribution output. Meanwhile, two (2) Islamic banks which were considered to be efficient, although not at the maximum level. Novelty - This study shows that Bank Panin Syariah achieves maximum efficiency with respect to distribution output, and that Bank Mega Syariah is considered efficient with respect to profitability output and personal revenue output. Type of Paper - Empirical Keywords: Islamic Banks; Efficiency; Maqashid Shariah; DEA; Indonesia; Malaysia. JEL Classification: G20, G21.

Need for calibration: applying a maximum threshold to liquidity ratio for Islamic banks

2020 ◽  
Vol 13 (1) ◽  
pp. 56-74
Author(s):  
Muhammed Habib Dolgun ◽  
Adam Ng ◽  
Abbas Mirakhor
Keyword(s):  
Financial Services ◽  
Risk Sharing ◽  
Financial Intermediation ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Alternative Mechanism ◽  
Islamic Banks ◽  
Content Type ◽  
Coverage Ratio ◽  
The Right

Purpose The purpose of this paper is to highlight the effects of liquidity regulations on Islamic banking using Turkey as a case study. It recommends an alternative mechanism using capital market standards for liquidity requirement of Islamic banks to mitigate certain risks. Design/methodology/approach The paper evaluates the correlation between cash and profit and between liquidity coverage ratio and capital adequacy ratio of participating banks in Turkey. Findings Islamic banks hold higher cash than they should. The paper suggests a maximum liquidity ratio for Islamic banks. Applying a cap to the liquidity coverage ratio will impose discipline on Islamic banks to manage their assets appropriately as well as to encourage their financial intermediation to the real sector. In addition, the authors argue that even if the cash outflows from investment account on the right side of Islamic banks’ balance sheets are included in the short-term projection, they should not be included in the denominator of the liquidity coverage ratio. Practical implications The current Basel requirements and Islamic Financial Services Board standards are disincentives to Islamic banks to provide risk-sharing or partnership-based investments and services to their customers and depositors. Effective legal and regulatory framework and supervisory oversight need to take into account the difference between the risk profile of a typical Islamic bank and a conventional bank. Originality/value Although it is well accepted that without adequate regulatory involvement it would not be possible to control and mitigate the risks related to Islamic banking financial intermediation, there should be a balance between the growth and stability of the industry. The regulatory involvement that satisfies this balance would be welcome.

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