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Islamic banks need to manage depositors' deposit withdrawals in a well manner in order to be able to optimize depositors' funds in their portfolio financing. Taking into account the Indonesian Islamic banking industry as a study case, this paper attempts to analyze the depositors' withdrawal behavior. Moreover, it also analyzes the responses of Islamic banks to mitigate such deposit withdrawals.

First, the paper accommodates the flow of funds of the Indonesian Islamic banking operations. Second, it formulates a liability side model of the competitive Islamic banking industry referring to some ideas from the conventional models. Then, the paper uses linear probability model (LPM) to identify depositors' withdrawal behavior and to analyze the responses of Islamic banks to mitigate deposit withdrawals.

It is found that depositors withdraw their money if: Islamic banks do not generate incomes from their financing; interest rate goes up; and total deposits tend to decrease. As such, Islamic banks have to anticipate this withdrawal behavior by doing two actions: reserving some liquidity and adjusting return sharing ratio to depositors. The output of this paper should benefit the policy markers and Islamic banks to understand depositors' behavior in withdrawing money and determine appropriate policies to manage it.

The best of author's knowledge, this is the first paper trying to analyze the depositors' withdrawal behavior with LPM model taking into account the Indonesian Islamic banking industry.

The purpose of this study is to examine the factors affecting deposit withdrawal intentions among Moroccan profit-sharing investment account holders.

Applying the push-pull-mooring (PPM) theory, a quantitative survey, based on insights brought to light by a previous qualitative study, was developed and administered to 166 depositors from five participatory banks at branches located in Morocco. Structural equation modeling was then used to evaluate the significance of relationships between the various variables under study.

Empirical findings showed that the PPM model with a second-order construct structure exhibited a better representation of the observed variables as compared to a first-order factor model. The results of the structural analysis indicated a significant direct relationship between withdrawal intention and each of the PPM model constructs: push and pull factors were found to have a positive impact on withdrawal intention, while mooring factors had a significant inverse relationship with withdrawal intention. The results of this study also revealed that the moderating role of the mooring construct was found in both relationships between push and withdrawal intention and between pull and withdrawal intention.

The absence of a longitudinal study measuring the actual withdrawal behavior is the main limitation of this study. Furthermore, withdrawal intention was examined without differentiating between individual and corporate depositors. Finally, despite being insightful, the empirical findings should be generalized with caution, as the sample was purposely chosen by the banks’ management.

This study implied that participatory banks should stress the importance of mooring factors, as they strongly inhibit depositors’ intention to shift their funds to the conventional banking system. Moreover, this study provides great indications to Moroccan regulators and policymakers on a number of issues that can be used to develop policies that could improve the participatory banking system.

To the best of the authors’ knowledge, this study represents the first attempt to confirm the effectiveness of the PPM model in examining depositor-withdrawal intentions. This study is also the first of its kind to address profit-sharing investment depositors’ apprehensions in the Moroccan context, to the best of the authors’ knowledge.

In the transitional process of promoting market-oriented interest rate, China is confronted with an important theoretical and practical issue: how to avoid bank runs and realize the smooth operation of the financial system. The purpose of this paper is to construct a bank-run dynamic model by taking into account a market environment with the transmission of multiple rounds of noise information, a comprehensive consideration of depositors’ expectation of return on assets (or earning rate/yields of assets), the efficiency of information processing and dissemination, and the different motives for premature withdrawal.

The authors discussed the dynamic process of bank runs, furnished the ratio and number of each round of bank run, and characterized the corresponding dynamic equilibrium as well. Furthermore, the authors expanded the benchmark model by incorporating the deposit insurance system (DIS) to discuss the action mechanism of DIS overruns.

The results show that DIS implementation has two opposite effects: stabilized expectation and moral hazard, by virtue of its influence over the two types of premature withdrawal motives of depositors; the implementation effect of DIS rests with the dual-effect comparison, which is endogenous to the institutional environment.

The policy implications are as follows: while implementing DIS, it is necessary to establish and improve the corresponding institutional construction and supporting measures, to consolidate market discipline and improve the supervisory role of the bank’s internal governance mechanism, so as to reduce the potential moral hazards. The financial system reform shall be furthered and the processing and dissemination efficiency of information be elevated to prompt depositors to form stable withdrawal expectations, thereby enhancing the stabilizing effect of DIS.

This study investigates the relationship between financial literacy, that is, financial knowledge and financial skills, and market discipline, with financial behavior as the mediating variable. The study uses data from Indonesian depositors in commercial banks to estimate the relationship between the variables.

This study applied an explanatory method with a quantitative approach by surveying 343 Indonesian commercial bank depositors, in both public and private banks. The responses were collected using the purposive sampling technique. This study applied structural equation modeling (SEM) using AMOS software to analyze the data and then to estimate the relationships between financial literacy and market discipline.

This study shows that financial knowledge, financial skills, and financial behavior can improve market discipline. This study also provides empirical evidence that financial behavior has a mediation effect on the relationship between financial skills and financial knowledge to the market discipline.

The results show that all financial literacy latent variables have a significant positive effect on market discipline. Financial behavior has a mediation effect on the relationship of financial skills and financial knowledge with market discipline. Depositors with good knowledge of financial products and services, who are skillful in managing their money and who demonstrate good financial behavior can effectively discipline the market. They will punish imprudent banking by actions such as the withdrawal of their funds. Financial literacy significantly enhances market discipline.

This study provides recommendations for regulators, practitioners, academics, and depositors, that is, the actors in the financial industry, on the need to empower consumers with financial literacy, while also promoting market discipline to recognize the importance of these two aspects for the sustainability of financial stability.

This study provides empirical evidence for the market discipline literature, using a behavioral approach, namely, the action of withdrawal of funds. The study then estimates the relationship between financial literacy, that is, financial knowledge and financial skills, and market discipline, with financial behavior as the mediating variable.

The purpose of this paper is to analyze and evaluate the present liquidity management in the Indonesian Islamic banking industry. It also proposes an integrated and comprehensive program of liquidity risk management which captures and assimilates the whole aspects of the issue and brings the industry into a better way of managing liquidity risk based on sharia principles.

The paper first examines the organizational structure of Islamic banks and Islamic windows in managing liquidity. Second, it investigates the characteristics of the depositors, their investment behaviors and expectations followed by the banks efforts and policies to manage the liquidity. Then, it identifies the potential liquidity problems and Islamic liquid instruments. Finally, it proposes an integrated and comprehensive program for managing liquidity.

The paper suggests institutional deepening; restructuring the liquidity management on the liability and asset sides; and revitalizing the usage of the Islamic liquid instruments, in the integrated program.

This is believed to be the first paper to propose a liquidity management improvement program in the Indonesian Islamic banking industry.

This paper aims to evaluate the role of depositor-specific features in a bank resolution. As the resolution framework in the EU is rather new, there are no empirical studies referring to the efficiency of this mechanism in protecting financial stability. Thus, the authors have checked the role of societal awareness of deposit guarantee schemes and the resolution, as well as the trust in public institutions, in avoiding bank runs in the case of resolution scenarios.

The study is based on telephone interviews conducted with 1,000 Poles, including bank customers whose banks have undergone resolution in recent years, and basic statistics of the resolved banks. The authors then apply two classes of models: binary probit regression and ordered probit regression.

The findings have indicated that the trust in public institutions and the experience gained with age play a key role in overall depositor behaviour. However, for resolutions, declared trust is replaced by case-specific trust based on the obtained information.

The survey is based on a sample of Polish citizens. In the future, international surveys may help diagnose cross-country differences among depositors. Moreover, studies on communication approaches may also support finding highly effective ways to reach various cohorts of depositors.

The existing literature on depositor behaviour in bank failure scenarios has relied on an experimental approach to test various research hypotheses. The research sample is not based on an experiment but on the responses of customers whose banks have actually undergone resolution.

The purpose of this paper is to study the optimal coverage limit in a model of deposit insurance with capital requirements and risk sensitive premia to prevent moral hazard.

The theoretical model has incorporated capital requirements, risk‐sensitive premium, and partial deposit insurance in a partial equilibrium model. The model discusses the interaction among risk‐taking banks, ex‐ante heterogeneous depositors, and a deposit insurer.

First, the paper shows that optimal coverage encourages depositors' monitoring and withdrawals. Partial deposit insurance improves social welfare. Second, risk‐sensitive premia and market discipline are essential to reduce bank risk taking behavior. Third, adjustment between level of coverage and the premium guarantees long term liquidity of the deposit insurance funds and makes banks better off. Fourth, numerical findings are consistent with the empirical evidence that shows differences in coverage between countries.

Timing and frequency of adjustments to coverage limits and the implementation of co‐insurance have been beyond the scope of this study but those implications are worth further investigation.

In the current crisis, banking regulations combined with poor management and supervision have been responsible for banks' improper leverages, lending and securitization. A bank failure could easily turn into a crisis when the financial institution is overly exposed to credit risks and when the government is least equipped to deal with those risks. Thus, the study of the partial deposit insurance is important in achieving stability in the banking sector.

The purpose of this paper is to analyze how response time in a laboratory experiment on bank runs affects withdrawal decisions.

In the authors’ setup, the bank has no fundamental problems, depositors decide sequentially whether to keep the money in the bank or to withdraw, and they may observe previous decisions depending on the information structure. The authors consider two levels of difficulty of decision-making conditional on the presence of strategic dominance and strategic uncertainty. The authors hypothesize that the more difficult the decision, the longer is the response time, and the predictive power of response time depends on difficulty.

The authors find that response time is longer in information sets with strategic uncertainty compared to those without (as expected), but the authors do not find such relationship when considering strategic dominance (contrary to the hypothesis). Response time correlates negatively with optimal decisions in information sets with a dominant strategy (contrary to the expectation) and also when decisions are obvious in the absence of strategic uncertainty (in line with the hypothesis). When there is strategic uncertainty, the authors find suggestive evidence that response time predicts optimal decisions.

Being a laboratory experiment, it is questionable if depositors in real life behave similarly (external validity).

Since episodes of bank runs are characterized by strategic uncertainty, the result that under strategic uncertainty, longer response time leads to better decisions suggests that suspension of convertibility is a useful tool to curb banking panics.

To the best of authors’ knowledge, this is the first study concerning the relationship between response time and the optimality of decisions in a bank-run game.

The purpose of this study is to show the presence of market discipline and provide an explanation for bank risk nondisclosure behavior, specifically market risk (MR), credit risk (CR), operational risk (OR) and counterparty credit risk (CCR). The response of market discipline when banks comply with Basel III capital and liquidity restrictions is also investigated in this study.

The study used the Lasso regression method to give accurate results with the lowest error when using small observational data with a large number of features.

First, theoretically, the study points to the presence of market discipline and its sensitivity to the risks disclosed by the bank, especially when applying capital regulations under Basel III. In addition, the study also shows differences between the developed and emerging countries in the sensitivity of market discipline to factors when considering banking regulations. Finally, an interesting result that the study shows is that the higher the index of economic freedom, the weaker the market discipline is, especially for emerging countries.

The study’s findings have several important implications: (1) help regulators devise policies to manage banks' risk and meet liquidity and capital requirements according to the Basel III framework. The effectiveness of market discipline is reduced, and banking regulators need to compensate by strengthening their supervisory functions. (2) Showed the reasons why banks ignore the disclosure of bank risks according to the provisions of the third pillar of the Basel III framework. Because when following the Basel III framework, depositors demand higher interest rates or increase market discipline towards riskier banks.

This study is the first attempt to assess market discipline under the new capital and liquidity regulations using the Lasso regression model as suggested by Tibshirani (1996, 2011), Hastie et al. (2009, 2015). This is also the first study to look at the impact of four different forms of risk on market discipline (as required by the Basel regulatory framework to improve disclosure).

Using bank-level data on MENA countries during 2000-2016, this study aims to examine the role and relevance of macroprudential policies in affecting depositor discipline.

The author uses the dynamic panel data methodology as compared to alternate techniques, owing to the ability of this technique to effectively address the endogeneity problem of some of the independent variables.

The findings suggest that market discipline for MENA banks occurs primarily through deposit rates. During the crisis, depositors typically focus on a catch-all measure of bank performance. Second, macroprudential policies play a role in influencing market discipline. Third, the behavior of depositors in exercising market discipline is more pronounced in countries with high Islamic banking share and works mainly through the price channel.

To the best of author’s knowledge, this is one of the early studies for MENA countries to examine this issue in a systematic manner. By focusing on an extended sample of MENA country banks covering an extensive period that subsumes the global financial crisis, author’s analysis is able to shed light on the relevance of macroprudential policies in affecting depositor discipline.