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Islamic Banks’ Resilience to Systemic Risks: Myth or Reality-Evidence from Bangladesh

Management of Islamic Finance: Principle, Practice, and Performance

ISBN: 978-1-78756-404-6, eISBN: 978-1-78756-403-9

ISSN: 1569-3767

Publication date: 14 December 2018

Abstract

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic resilience of three types of banks: fully fledged Islamic banks, purely conventional banks (CB), and CB with Islamic windows. The authors use the market-based systemic risk measures of marginal expected shortfall and systemic risk to identify which type is more vulnerable to a systemic event. The authors also use ΔCoVaR to identify which type contributes more to a systemic event. Using a sample of observations on 27 publicly traded banks operating over the 2005–2014 period, the authors find that CB is the least resilient sector to a systemic event, and is the one that has the highest contribution to systemic risk during crisis times.

Keywords

Citation

Hashem, S.Q. and Abdeljawad, I. (2018), "Islamic Banks’ Resilience to Systemic Risks: Myth or Reality-Evidence from Bangladesh", Hassan, M.K. and Rashid, M. (Ed.) Management of Islamic Finance: Principle, Practice, and Performance (International Finance Review, Vol. 19), Emerald Publishing Limited, Bingley, pp. 37-68. https://doi.org/10.1108/S1569-376720180000019003

Publisher

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Emerald Publishing Limited

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