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THE EFFECTS OF THE GLOBAL CRISIS ON ISLAMIC AND CONVENTIONAL BANKS: A COMPARATIVE STUDY

THE EFFECTS OF THE GLOBAL CRISIS ON ISLAMIC AND CONVENTIONAL BANKS: A COMPARATIVE STUDY This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by examining the impact of the crisis on profitability, credit and asset growth, and external ratings in a group of countries where the two types of banks have significant market share. Our analysis suggests that IBs have been affected differently than CBs. Factors related to IBs' business model helped limit the adverse impact on profitability in 2008, while weaknesses in risk management practices in some IBs led to a larger decline in profitability in 2009 compared to CBs. IBs' credit and asset growth performed better than did that of CBs in 2008–2009, contributing to financial and economic stability. External rating agencies' re-assessment of IBs' risk was generally more favorable. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Commerce, Economics and Policy World Scientific Publishing Company

THE EFFECTS OF THE GLOBAL CRISIS ON ISLAMIC AND CONVENTIONAL BANKS: A COMPARATIVE STUDY

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Publisher
World Scientific Publishing Company
Copyright
Copyright ©
ISSN
1793-9933
eISSN
1793-9941
DOI
10.1142/S1793993311000270
Publisher site
See Article on Publisher Site

Abstract

This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by examining the impact of the crisis on profitability, credit and asset growth, and external ratings in a group of countries where the two types of banks have significant market share. Our analysis suggests that IBs have been affected differently than CBs. Factors related to IBs' business model helped limit the adverse impact on profitability in 2008, while weaknesses in risk management practices in some IBs led to a larger decline in profitability in 2009 compared to CBs. IBs' credit and asset growth performed better than did that of CBs in 2008–2009, contributing to financial and economic stability. External rating agencies' re-assessment of IBs' risk was generally more favorable.

Journal

Journal of International Commerce, Economics and PolicyWorld Scientific Publishing Company

Published: Dec 1, 2011

Keywords: Islamic banks conventional banks financial stability financial crisis regression analysis

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