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Open Access
Article
Publication date: 17 April 2019

Muhammed Habib Dolgun, Abbas Mirakhor and Adam Ng

This paper aims to critically investigate the liquidity risk management of Islamic banks and develop an alternative regulatory framework appropriate for liquidity management of…

3382

Abstract

Purpose

This paper aims to critically investigate the liquidity risk management of Islamic banks and develop an alternative regulatory framework appropriate for liquidity management of these banks.

Design/methodology/approach

The specific risk profile of an Islamic bank requires developing a new and more efficient regulatory framework, which relies on risk- sharing and symmetric information among parties. The paper makes a differentiation between small local banks and internationally active Islamic banks and proposes to apply liquidity requirements only for internationally active Islamic banks.

Findings

A new proposal for the liquidity coverage ratio (LCR) of Islamic banks is developed in this paper towards mitigating risks and concurrently protecting the interests of investment account holders. Minimum and maximum thresholds are proposed for each liquid asset in this new LCR framework. An alternative liquidity approach is discussed to complement the proposal and several policy options are suggested.

Originality/value

As participation banks are exposed to market liquidity and market risks, more high-quality liquid instruments within a risk-sharing regulatory framework may provide the inner adjustment process through which any mismatch regarding maturity, risk, value or linkage with the real economy is corrected systematically. It offers policy implications for regulators, supervisors and international organizations.

Details

ISRA International Journal of Islamic Finance, vol. 11 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 17 March 2022

Bashar Abdallah and Francisco Rodríguez Fernandez

This paper aims to study the impact of (regulatory and nonregulatory) liquidity on contingent convertible (CoCo) issuance and the relationship between CoCos and asset quality.

Abstract

Purpose

This paper aims to study the impact of (regulatory and nonregulatory) liquidity on contingent convertible (CoCo) issuance and the relationship between CoCos and asset quality.

Design/methodology/approach

The analysis of this study comprises two stages. In the first stage, the authors used a logit model to test whether banks with riskier assets as well as lower solvency and (regulatory and nonregulatory) liquidity are more likely to issue CoCos. In the second stage, the authors used univariate analysis and fixed effects regression to measure the impact of Additional Tier 1 (AT1) CoCos on the quality of the issuer’s assets.

Findings

The study shows that regulatory liquidity ratios are negatively related to CoCo issuance. This study also finds that the likelihood to issue CoCo is higher when banks have lower regulatory capital or are less risky. Asset quality is found to not change significantly after the issuance. All in all, these results suggest that while solvency regulation is primarily regarded as the main motivation for CoCo issuance, liquidity regulation also matters.

Research limitations/implications

Despite the fact that CoCos have been emerging as an alternative way to help banks meet regulatory capital requirements, the paper argues that the relation between liquidity regulation and CoCos should be taken into account.

Originality/value

This study presents an empirical analysis on the CoCos instrument, focusing on the relationship between AT1 CoCos and liquidity regulation. Therefore, it serves to fill a gap in the literature on the underlying forces behind CoCo issuance. Moreover, this study measures the impact of AT1 CoCos issuance on bank risk, particularly on the quality of the issuer’s assets.

Details

Journal of Financial Regulation and Compliance, vol. 30 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Open Access
Article
Publication date: 18 October 2022

MD. Rasel Mia

This study aims to examine the impact of market competition, and capital regulation on the cost of financial intermediation of banks of the Bangladesh banking industry.

1156

Abstract

Purpose

This study aims to examine the impact of market competition, and capital regulation on the cost of financial intermediation of banks of the Bangladesh banking industry.

Design/methodology/approach

This study has used a balanced panel dataset comprised of 340 firm-year observations for 34 commercial banks in the Bangladesh banking industry from 2011 to 2020. The Prais Winsten panel estimator has been used to assess the impact of market competition and capital regulation on the cost of financial intermediation of banks.

Findings

Based on the regression results, this study has documented that greater market competition results in a lower cost of financial intermediation for banks. Similarly, an increase in the regulatory capital of banks increases the cost of financial intermediation of banks. The main findings of this study are found robust by using alternative proxies for the cost of financial intermediation, market competition and capital regulation. The regression results also suggest that private commercial banks tend to have a higher cost of financial intermediation than state-owned commercial banks.

Research limitations/implications

The regulatory reforms should aim to foster sustainable and optimal market competition for the Bangladesh banking industry to regulate the market power of banks to reduce the cost of financial intermediation. The regulatory authority of Bangladesh should find the optimal policy measures for implementing the capital regulation in the banking industry which would reduce the cost of financial intermediation margin of banks.

Originality/value

Unlike previous studies which have used structural market competition measures, this study has used non-structural market competition measures to assess the relationship between market competition and cost of financial intermediation in the Bangladesh banking industry.

Details

Asian Journal of Economics and Banking, vol. 7 no. 2
Type: Research Article
ISSN: 2615-9821

Keywords

Open Access
Article
Publication date: 8 December 2021

Paola Ramassa and Giulia Leoni

This paper explores how the International Accounting Standards Board (IASB) has dealt with the emerging issue of accounting for cryptocurrencies by investigating its constituents'…

7352

Abstract

Purpose

This paper explores how the International Accounting Standards Board (IASB) has dealt with the emerging issue of accounting for cryptocurrencies by investigating its constituents' expectations and the motivations underlying its regulatory response.

Design/methodology/approach

The theoretical lens of regulatory space is used to analyse the four-year debate around cryptocurrency holdings and informs the extensive thematic analysis of public documents, meetings recordings and comment letters on the topic.

Findings

Facing national standard setters' initiatives to regulate accounting for cryptocurrency, the IASB defended its position in the regulatory space through an agenda decision based on ewct 2xisting standards, which was finalised by the International Financial Reporting Standards Interpretation Committee (IFRS IC) despite criticism from constituents and Board members.

Research limitations/implications

The paper provides insights into the IASB approach to a regulatory vacuum regarding a new class of items, which derive from a new and rapidly-evolving technology. Disruptive technology impacts the contested arena of accounting regulation, in which the constituents ask for new solutions and the IASB tries to resist such pressures, while defending its position.

Practical implications

The paper sheds light on the growing importance of agenda decisions in the IFRS environment and on the limits of the IASB long regulatory process in the circumstance of emerging accounting issues deriving from rapidly-evolving technology.

Originality/value

This investigation is timely and relevant as it considers the regulatory issues arising from disruptive technological innovations (i.e. cryptocurrency), shedding light on the limits of regulatory processes in times of technological change.

Details

Accounting, Auditing & Accountability Journal, vol. 35 no. 7
Type: Research Article
ISSN: 0951-3574

Keywords

Open Access
Article
Publication date: 11 October 2018

Dalal Aassouli, Muhammed-Shahid Ebrahim and Rohaida Basiruddin

This paper aims to propose a liquidity management solution for Islamic financial institutions (IFIs) that concurs with sustainable development and financial stability.

2828

Abstract

Purpose

This paper aims to propose a liquidity management solution for Islamic financial institutions (IFIs) that concurs with sustainable development and financial stability.

Design/methodology/approach

The study is a qualitative research. It uses the exploratory research methodology, specifically the content analysis approach, to gather primary data and identify and interpret relevant secondary data and Sharīʿah concepts. The purpose is to develop a liquidity management solution for IFIs. The proposal is based on the Unleveraged Green Investment Trust (UGIT) model, which is consistent with Basel III regulatory requirements. In developing the UGIT model, the exploratory research was complemented by a case study to examine the UGIT solution for the particular case of renewable energy.

Findings

The model demonstrates how financial innovation can meet both financial stability and sustainable development objectives, thereby achieving the spirit of Islamic finance. The structure further highlights the importance of regulatory and fiscal frameworks to enhance liquidity management and investor appeal for green financial instruments.

Originality/value

This study suggests a structure of UGIT to enable IFIs to meet their liquidity management needs while promoting sustainable development.

Details

ISRA International Journal of Islamic Finance, vol. 10 no. 2
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 10 August 2023

Adrienne Heritier

This paper aims to conceptualize and empirically illustrate the challenges that financial market regulation presents to politicians and the organization tasked with specifying…

Abstract

Purpose

This paper aims to conceptualize and empirically illustrate the challenges that financial market regulation presents to politicians and the organization tasked with specifying regulations and supervising their implementation in the interest of users and consumers of financial instruments. It analyses the problem from the viewpoint of the governor's dilemma and the control/competence conflict, the linked problem of the rent-seeking of agents/intermediators and consumers of financial instruments. Political accountability problems are enhanced by the materiality of the technologies used, i.e. algo trading.

Design/methodology/approach

The paper theoretically conceptualizes and empirically illustrates the argument.

Findings

The paper finds that regulators of digitalized financial markets are faced with considerable problems and depend on private agents when regulating financial transactions. However, the new technological instruments also offer new possibilities for securing compliance.

Research limitations/implications

Further research should focus more in-depth on the cooperation between public and private actors in the specification and implementation of regulatory details. It should further investigate the conditions which allow regulators to use RegTech in the surveillance of financial firms.

Practical implications

Since financial market transactions are opaque for most users, the creation of more transparency is crucial to hold regulators accountable in their activity of surveillance of financial firms. New algorithm-based technologies may lend important support in doing so.

Originality/value

By linking the different analytical perspectives, i.e. the governor's dilemma vis-à-vis the intermediator or agent and the possible rent-seeking of intermediators, under the condition of a highly developed technology of financial transactions as well as the market structure, the paper offers new insights into the limits as well as new opportunities of regulating financial markets allowing for political accountability of regulators and financial firms.

Details

International Trade, Politics and Development, vol. 7 no. 3
Type: Research Article
ISSN: 2586-3932

Keywords

Open Access
Article
Publication date: 25 March 2020

Ana Odorović and Karsten Wenzlaff

The paper discusses the rationale for a widespread reliance on Codes of Conduct (CoC) in European crowdfunding through the lenses of economic theories of self-regulation. By…

2504

Abstract

Purpose

The paper discusses the rationale for a widespread reliance on Codes of Conduct (CoC) in European crowdfunding through the lenses of economic theories of self-regulation. By analysing the institutional design of CoCs in crowdfunding, the paper illustrates the differences in their regulatory context, inclusiveness, monitoring and enforcement. It offers the first systematic overview of substantial rules of CoCs in crowdfunding.

Design/methodology/approach

A comparative case study of nine CoCs in Europe is used to illustrate differences in their institutional design and discern the economic purpose of the CoC.

Findings

The institutional design of different CoCs in Europe mainly supports voluntary theories of self-regulation. In particular, the theory of reputation commons has the most explanatory power. The substantial rules of CoC in different markets show the potential sources of market failure through the perspectives of platforms.

Research limitations/implications

CoCs appear in various regulatory, cultural, and industry contexts of different countries. Some of the institutional design features of CoC might be a result of these characteristics.

Practical implications

Crowdfunding associations wishing to develop their own CoC may learn from a comparative overview of key provisions.

Social implications

For governments in Europe, contemplating creating or revising bespoke crowdfunding regimes, the paper identifies areas where crowdfunding platforms perceive market failure.

Originality/value

This paper is the first systematic study of self-regulatory institutions in European crowdfunding. The paper employs a theoretical framework for the analysis of self-regulation in crowdfunding and provides a comparison of a regulatory context, inclusiveness, monitoring and enforcement of different CoCs in Europe.

Details

Baltic Journal of Management, vol. 15 no. 2
Type: Research Article
ISSN: 1746-5265

Keywords

Open Access
Article
Publication date: 10 July 2017

Halit Yanīkkaya and Yaşar Uğur Pabuçcu

This paper aims to evaluate the root causes of stagnation of the Islamic banking sector in Turkey in three steps and proposes solutions and policy recommendations.

8125

Abstract

Purpose

This paper aims to evaluate the root causes of stagnation of the Islamic banking sector in Turkey in three steps and proposes solutions and policy recommendations.

Design/methodology/approach

First, global Islamic banking practices in terms of governance and instruments are summarised and compared with the Turkish experience. Second, the financial and efficiency ratios of Turkish Islamic banks (IBs) and conventional banks (CBs) are compared and analysed for the period 2005 to 2015. Finally, the long-term growth strategy of Turkish IBs is evaluated.

Findings

This paper asserts that Islamic banking in Turkey diverges from Islamic banking practices of prominent countries by not having a Sharīʿah governance framework at either a national or bank level. Turkey is thus immediately in need of a sound Sharīʿah governance framework. Increasing the variety of instruments and improving the perception of Islamic banking in the society are other critical points. Furthermore, regulatory and research institutions specifically focusing on Islamic banking are insufficient. A large number of financial and efficiency ratios reveal that the efficiency and profitability of IBs fall behind that of CBs. IBs should improve their business models, operational efficiencies and information technology infrastructure as these issues are undervalued in their growth strategy.

Originality/value

This study sheds light on the Turkish Islamic banking sector, which is a rarely studied topic. It is the first study that provides institutional differences of banking practices and evaluates the efficiency status and growth strategy of IBs in Turkey.

Details

ISRA International Journal of Islamic Finance, vol. 9 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Open Access
Article
Publication date: 19 June 2019

Arif Budy Pratama and Satria Aji Imawan

The purpose of this paper is to develop and validate a scale for measuring perceived bureaucratic readiness for smart city initiatives.

6098

Abstract

Purpose

The purpose of this paper is to develop and validate a scale for measuring perceived bureaucratic readiness for smart city initiatives.

Design/methodology/approach

The present study employs a mixed method approach to achieve its research objectives. An exploratory study, consisting of literature review and qualitative interviews with key informants, was conducted to develop an initial instrument for measuring bureaucratic readiness. An online survey of 40 civil servants involved in smart city programmes in the Yogyakarta City government was then administered to test the instrument’s validity and reliability.

Findings

Perceived bureaucratic readiness can be measured through four dimensions: commitment of the upper echelons, legal support, information technology resources and governance.

Research limitations/implications

The proposed scale provides an alternative instrument for measuring perceived bureaucratic readiness for smart city initiatives. However, as data were only derived from one city government, they are relatively small in scope. Future research can be conducted for generalisation by replicating this study in other cities, thereby measuring its effectiveness in other contexts and settings.

Practical implications

This study not only provides a better understanding of bureaucratic readiness for smart city initiatives, but also proposes an assessment tool as a practical means of assessing bureaucratic readiness. The quantification of readiness is beneficial to putting smart city programmes into practice, as it allows smart city managers to assess the internal bureaucracy’s level of readiness. It also allows managers to mitigate and further policy agendas and thereby improve the bureaucracy’s support for smart city programmes.

Originality/value

Literature sometimes underestimates the role of bureaucracy in smart city implementation while overly stressing stakeholders, vendors and technology. This paper attempts to contribute to smart city research by reaching beyond the technological perspective and focusing on local government bureaucracy. None of the extant literature provides a scale for measuring bureaucratic readiness. The study thus proposes a systematic way to develop a means of measuring perceived bureaucratic readiness for smart city programmes.

Details

Public Administration and Policy, vol. 22 no. 1
Type: Research Article
ISSN: 1727-2645

Keywords

Open Access
Article
Publication date: 19 March 2018

Dominic Detzen

The purpose of this paper is to analyze how “New Deal” regulatory initiatives, primarily the Securities Acts and the Securities and Exchange Commission (SEC), changed US auditors’…

2943

Abstract

Purpose

The purpose of this paper is to analyze how “New Deal” regulatory initiatives, primarily the Securities Acts and the Securities and Exchange Commission (SEC), changed US auditors’ professional knowledge conception, culminating in the 1938 expansion of the Committee on Accounting Procedure (CAP), the first US body to set accounting principles.

Design/methodology/approach

The paper combines Halliday’s (1985) knowledge mandates with Hancher and Moran’s (1989) regulatory space to attain a theory-based understanding of auditors’ changing knowledge conceptions amid regulatory pressure. It draws on a range of primary and secondary sources to examine the period from 1929 to 1938.

Findings

Following the stock market crash, the newly created SEC aimed to engage auditors as a means to regulate companies’ accounting practices based on a set of codified principles. While entailing increased status, this new role conflicted with the auditors’ knowledge conception, which was based on professional judgment and personal integrity. Pressure from the SEC and academics eventually made auditors agree to a codification of their professional knowledge and create the CAP as a cooperative regulatory solution.

Originality/value

The paper explores the role of auditors’ knowledge conceptions in the emergence of today’s standard setting. It is suggested that auditors’ incomplete control of their professional knowledge made standard setting a form of co-regulation, located between the actors occupying the regulatory space of accounting.

Details

Accounting, Auditing & Accountability Journal, vol. 31 no. 3
Type: Research Article
ISSN: 0951-3574

Keywords

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