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The purpose of this paper is to investigate whether there are any differences in the capitalization speed‐of‐adjustment across regulatory capitalization buckets of commercial banks in the USA, for the period 2002‐2009.

The Federal Deposit Insurance Corporation (FDIC) monitors banks' capital ratio using the bucketing approach. Thus, this discrete and ordered variable is modeled in the context of a partial adjustment specification, controlling for initial conditions and cross‐sectional heterogeneity. Parameters are estimated with the generalized dynamic random effects ordered probit technique that is flexible enough to allow for differential effects of covariates across capitalization categories.

The main result is that the speed of adjustment is monotonically increasing for banks belonging in lower capitalization buckets, after controlling for bank‐specific capitalization determinants. In addition, substantial differential impacts of capitalization drivers across regulatory buckets are uncovered.

This an important finding both for regulators and market participants since it sheds light on a very crucial aspect of banks' behaviour.

This is the first paper that adopts the FDIC bucketing in the actual modelling. In addition, it uses the generalized dynamic random effects ordered probit technique in order to explore potential differential impact of capital ratio determinants across buckets.

This study aims to test whether loan loss provisions in Islamic banks is procyclical by explicitly examining the link between non-discretionary provisions and loan growth. In the next stage, this paper tests whether the link between non-discretionary provisions and loan growth is conditional on bank capitalization and lending. This is to identify whether bank-specific factors affect the procyclicality of non-discretionary provisions and whether such procyclicality can be explained by income smoothing in banks with different capitalization and loan profiles.

This study is conducted in four stages. The first stage identifies the determinants of loan loss provisions. The second stage investigates whether income smoothing is affected by capitalization and lending activities. In the third stage, the link between non-discretionary provisions and loan growth is examined. In the fourth stage, this paper tests whether the link between non-discretionary provisions and loan growth is affected by bank capitalization and lending. A two-way panel-fixed effect model is used.

Non-discretionary provisions are procyclical, particularly for banks with lower capitalization and lending activities, because such banks do not conduct income smoothing. Specifically, banks with lower capitalization experience a decline in loan growth when non-discretionary provisions to cover credit risk increase.

The dataset used in this study follows Soedarmono et al. (2017) and does not enable to differentiate types of financing products in Islamic banks that may exacerbate or mitigate the procyclicality of non-discretionary provisions.

This paper extends prior literature on the procyclicality of loan loss provisions by specifically investigating the influence of non-discretionary provisions on loan growth in Islamic banks and whether such relationship depends on the role of income smoothing undertaken by banks with different levels of capitalization and lending. This paper builds on the work of Soedarmono et al. (2017) in which they do not explicitly examine the relationship between loan loss provisions and loan growth.

In light of the current debate on bank capital requirements, the purpose of this paper is to investigate the relative impact of capitalization on risk‐taking efficiency in Islamic and conventional banks. The author tests whether changes occurring to the capital structure of such different types of intermediaries unevenly affect their behaviour in terms of risk‐taking efficiency.

The paper conducts an empirical analysis using data for the period 2001‐2011 by means of both standard regression methods and stochastic cost frontier techniques.

Results provide evidence that more capitalized Islamic banks are associated to less risky positions in terms of their asset structure. In particular, the latter exhibit higher liquidity standards and a lower incidence of non‐performing loans compared to other banks. This has delayed positive effects on profitability and no substantial impact on efficiency. On the other hand, highly capitalized conventional banks tend to shift from more traditional lending activities to investment in other (profit generating) assets. Such strategy increases profitability and efficiency, although raising impaired loans.

This study does not address potential endogeneity concerns that might affect the variables at stake, hence mainly providing indications in terms of correlation between phenomena rather than causality.

The analysis has important practical implications when considering capital adequacy as a regulatory tool for managing the risk of Islamic banks' activity, following principles similar to those recommended by the Basel committee.

The original contribution of the paper to the literature consists of comparing the effects of capitalization in different types of banks, and results can be usefully exploited by policymakers wishing to tailor banking regulation on the specific model of banking they are entitled to regulate.

This paper aims to examine the effect of bank-specific, financial structure and macroeconomic factors on the risk-taking behavior, stability and profitability of banks in Gulf Cooperation Council (GCC) economies during 1998–2017.

The authors use a two-step system generalized method of moments dynamic model to analyze the data.

The results show that non-traditional activities increase the risk and decrease the stability and profitability of banks that are highly capitalized, highly liquid and large. Banks in this group are less engaged in securities investments and their higher degree of loan exposure leads to a decrease in risk and an increase in their stability and profitability. Higher concentration increases the risk and decreases the stability and profitability of banks that are less capitalized, less liquid and small. Banks with a higher share of non-traditional activities are riskier and less stable and less profitable before the financial crisis. The study finds that banks with relatively higher capitalization and high lending growth rates are riskier, profitable and less stable during the crisis. Larger commercial banks are less risky and more stable and profitable than smaller banks before the global financial crisis. Islamic banks performed better in terms of fee income, capitalization, liquidity, asset quality and have higher market concentration than conventional banks.

The study provides the first comprehensive empirical evidence on the drivers of risk-taking behavior, stability and profitability of the GCC banks. It also investigates the differences across these variables based on the characteristics of financial strength such as capitalization, liquidity and size; before, during and after the financial crisis; and differences between Islamic and conventional banks.

While poverty alleviation is the first core goal of Sustainable Development Goals (SDGs), and microfinance institutions (MFIs) are considered important instruments for poverty alleviation in developing countries as they provide credit access to the poor, there is surprisingly little evidence of the drivers of the lending behavior of microfinance institutions. Hence, the purpose of this study is to identify the factors that influence the credit growth of MFIs in Sub-Saharan Africa (SSA).

The study relies on unbalanced panel dataset of 130 MFIs operating across 31 countries in SSA during the period 2004–2014 constituting 546 useable observations. The study uses the Arellano-Bover/Blundell-Bond two-step generalized method of moments (GMM) Windmeijer bias-corrected standard errors to estimate the models.

The results confirm that while capitalization, liquidity and size are positively associated with credit growth, profitability negatively impacts credit growth; whereas, other MFI specific factors namely portfolio quality, deposit growth and nondeposit borrowing growth have little direct effects on MFI credit growth. The results also show that MFI credit growth is pro-cyclical but negatively related to GDP per capita consistent with the theory of convergence. On the other hand, inflation and employment are not important covariates in the credit growth of MFIs.

The findings suggest that if MFIs improve their liquidity and size by attracting more deposits and nondeposit borrowings, among others, they can increase credit access to the poor. Moreover, since the lending behavior of MFIs is not resilient to GDP shocks, different measures are needed to increase the financial stability of the microfinance industry. In this respect, since MFI capitalization is positively associated with credit growth and MFI credit growth is pro-cyclical, the findings provide useful insights to central banks/regulatory authorities and the Basel Committee as to the need for a counter-cyclical capital buffer requirement in the microfinance industry.

The study is the first comprehensive study to examine the drivers of MFI lending behavior as an extension to lending behavior models from the banking industry.

This paper aims to explore the relationship between bank market power and stability of financial institutions in Italy between 2001 and 2012. The authors first test the existence of a U-shaped relationship between market power and financial stability. Second, they regress the market share indicator on bank risk-taking to underline whether financial stability is affected by increasing or decreasing the market power of banks. Third, they explore whether this relationship is affected by the size, level of capitalization and credit insolvency of banks.

Relying on highly territorially disaggregated data at labor market areas level, the authors estimate the impact of bank market power and other explanatory variables on a proxy of risk taking behavior such as the banking “stability inefficiency” derived simultaneously from the estimation of a stability stochastic frontier. Bank market power is taken into account through an individual measure based on loans. Financial stability is calculated through the Z-score. The authors use, as risk-taking measure, the stability inefficiency whose estimation approach is the stochastic frontier analysis.

The empirical evidence shows that the inefficiency of financial stability is found to be U-shaped related with respect to the measure of market power. Bank size is an essential factor in explaining the relationship between bank market power and risk-taking. Cooperative banks have fewer incentives to gain market power to better perform in term of risks. The reform of the cooperative banks that took recently place in Italy is not supported by the data.

The relationship between bank market power and financial stability has been analyzed using a rich sample of cooperative, commercial and popular banks in Italy over the 2001-2012 period. The authors rely on labor market areas being sub-regional geographical areas where the bulk of the labor force lives and works. The paper investigates the market power-stability link considering both cooperative and non-cooperative banks. Indeed, specific attention has been paid on cooperative banks because of their mission in favor of the local community as only few studies, to the best of the authors’ knowledge, examine cooperative banking.

Using bank-level data over the 1994–2015 period, the authors aim to investigate the role of bank-specific factors on credit risk in Italy by considering two different groups of banks, namely, cooperative and non-cooperative (commercial and popular), in different local markets.

Relying on highly territorially disaggregated data at labour market areas’ level, the authors estimate the impact of the role of bank-specific factors on credit risk in Italy from the estimation of a fixed-effect estimator. Non-performing loans to total loans has been used as a proxy of credit risk; the bank-specific factors are as follows: growth of loans, reflecting credit policy; log of total assets, controlling for banks’ size; loans to total assets, reflecting the volume of credit market; equity to total assets, capturing the solvency of banks and reflecting their capital strength; return on assets, reflecting the profitability of banks; deposits to loans, reflecting the intermediation cost; cost of total assets, reflecting the banks’ efficiency or volume of intermediation cost.

The empirical findings suggest that regulatory credit policy, capitalisation, volume of credit and volume of intermediation costs are the main bank-specific factors affecting non-performing loans. Nevertheless, the present analysis suggests that the behaviour of cooperative banks’ behaviour seems to be in line with that of commercial rather than popular banks, casting doubts about the feasibility of their credit policies. It turns out that recent reforms involving popular and cooperative banks represent the first step toward the enhancement of the stability and efficiency of the Italian banking system. While the present study’s benchmark results are not particularly affected by the degree of competition in the banking sector and by banks’ size, it shows that both cooperative and non-cooperative banks have undertaken more prudent credit policies after the advent of the financial crisis and the introduction of the Basel regulation.

The relationship between bank-specific factors and credit risk has been analysed using a rich sample of cooperative, commercial and popular banks in Italy over the 1994–2015 period. The authors rely on labour market areas being sub-regional geographical areas where the bulk of the labour force lives and works. The contribution is motivated by the financial distress experienced after the 2008 financial crisis, which has significantly hit the Italian banking system and cooperative banks in particular.

This paper empirically examines the short-term and long-term associations between risk, capital and efficiency (R-C-E) in the Indian banking sector across 2008–2019 to answer the presence of causation or contemporaneousness in the R-C-E nexus.

The paper focuses on three objectives. First, the authors determine short-term causality in the risk–efficiency relationship by studying the simultaneous influence of a wide array of banking risks on DEA-based technical and cost efficiency in static and dynamic situations. Second, the authors introduce bank capital and contemporaneously determine the interplay between R-C-E using seemingly unrelated regression equation (SURE) and three-staged least squares (3SLS). Last, the authors assess stability in inter-temporal associations using Granger causality in an autoregressive distributed lag (ARDL) generalized method of moments (GMM) framework.

The authors contend that high capital buffers reduce insolvency risk and increase bank stability. Technically efficient banks carry lesser equity buffers, suggesting a trade-off between capital and efficiency. However, capitalization makes banks more technically efficient but not cost-efficient, implying that over-capitalization creates cost inefficiencies, which, in line with the cost skimping hypothesis, forces banks to undertake risk. Concerning causal relationships, the authors conclude that inefficiency Granger-causes insolvency and increases bank risk. Further, steady increases in capital precede technical and cost efficiency improvements. The converse also holds as more efficient banks depict temporal increases in capitalization levels.

The paper is perhaps the first that acknowledges the influence of the “time” perspective on the R-C-E nexus in an emerging economy and advocates that prudential regulations must focus on short-term and long-term intricacies among the triumvirate to foster a stable banking environment.

The purpose of this paper is to investigate the risk-taking channel of monetary policy transmission in the Chinese banking industry. This study also investigates the role of various other factors in the risk-taking channel.

This study used panel data from 2000 to 2012, and a dynamic panel model (Difference GMM) was applied.

The empirical findings of this paper suggest that loose monetary policy rates increase bank risk-taking. Unlike previous studies, the results of this paper suggest that the bank-specific factors (size, liquidity and capitalization) do not significantly affect the risk-taking channel. However, the market structure does have a stabilizing effect on monetary policy transmission and the risk-taking channel. Higher market power weakens the risk-taking channel of monetary policy transmission.

Of significance to the policymakers' point of view is that loose monetary policy induces banks to take excessive risks. However, such effects can be mitigated by encouraging a proper level of market power in banking markets.

This study investigated the risk-taking channel of monetary policy transmission for the Chinese banking industry. Due to the unique features of the People's Bank of China (PBC, Central Bank of China) policy, this study also contributes to the literature by comparing price-based and quantity-based monetary policy tools and their effectiveness in financial stability and monetary policy transmission. Furthermore, the role of market structure is also investigated in the risk-taking channel.

The purpose of this study is to evaluate the global developments in the area of fintech solutions by analyzing Islamic and Conventional banks core accounting and market analysis IFIs and their impact on financial inclusion within its core markets.

The authors collect and analyze annual accounting and market Data of the top ten largest Islamic banks and the top ten US Conventional banks, in terms of Total Asset and Market Capitalization, from Bloomberg Data.

The analysis of Bloomberg data shows higher risk-return for Islamic banks–except ROE Market measure that we suggest-than US conventional banks. Nonetheless, Islamic banking grew faster than conventional banking over the period 2006–2021. As a business model, we find that Islamic banks take more credit with more than seventy percent of their profit from loans, while US conventional banks struggle to reach seventy percent interest rate ratio. The authors’ research documents that Fintech and digitalization are driving Islamic finance growth during financial and economic downturns.

FinTech data is not available for banks, further insights of analysis on FinTech and Innovations in the banking sectors.

Islamic banks continuously innovate to satisfy the users of their services and Fintech is opportune to innovation. This study could be interesting for both practitioners and academics wishing to understand and compare Islamic and conventional banking futures.

The authors compared two banking systems, the US and Islamic Banks, which could be useful for users to differentiate between those banking operations.

The authors collected accounting and market data from Bloomberg of top 10 Islamic and top 10 US Conventional banks from 2006 to 2021 to examine Risk-Return, Growth and Business Model of those banks. The authors propose a new Risk-Return measure ROE-Market and its volatility.