Islamic banking and risk: The impact of Basel II

Alexandra Zins and Laurent Weill

Economic Modelling, 2017, vol. 64, issue C, 626-637

Abstract: The expansion of Islamic banking raises questions about its impact on financial stability. We question whether the implementation of Basel II standards influences the gap in risk between Islamic and conventional banks. We use a sample of 558 banks from 24 countries that had an Islamic banking presence between 2007 and 2013. We exploit the variation in Basel II implementation across countries to use a differences-in-differences approach. Risk is considered according to insolvency risk and credit risk indicators. We find that Basel II standards enlarge the gap in risk between Islamic and conventional banks at the expense of Islamic banks. These findings are also observed when separately considering small banks and large banks. We thus support the view that the relationship between Islamic banking and risk is conditional to the regulatory framework.

Keywords: G21; Islamic banking; Risk; Financial stability (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999316302887
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:64:y:2017:i:c:p:626-637

DOI: 10.1016/j.econmod.2017.05.001

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().