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Financial Stability of Islamic and Conventional Banks in Saudi Arabia: a Time Series Analysis

Author

Listed:
  • Hassan Ghassan

    (King Faisal University)

  • Stefano Fachin

    (Universita' di Roma "La Sapienza")

  • Abdelkarim Guendouz

    (King Faisal University)

Abstract

Islamic banks are characterised by the compliance to Islamic laws and practices, the main ones being the prohibition of interest and loans trading. Remarkably, during the 2008-2009 financial crisis, when a large number of conventional banks have announced bankruptcy, no single Islamic bank failure has been reported. However, there is no clear consensus in the literature on question of whether Islamic banks are more or less stable than conventional banks. We study a sample of Saudi banks over a period centred on the 2008 financial crisis. The main conclusions are: (i) the variables typically used in financial stability studies may be non-stationary, a feature ignored in the literature, and, (ii), individual heterogeneity may matter more than the conventional or islamic nature of the banks.

Suggested Citation

  • Hassan Ghassan & Stefano Fachin & Abdelkarim Guendouz, 2013. "Financial Stability of Islamic and Conventional Banks in Saudi Arabia: a Time Series Analysis," DSS Empirical Economics and Econometrics Working Papers Series 2013/1, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
    • Handle: RePEc:sas:wpaper:20131
    as

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    File URL: https://www.dss.uniroma1.it/RePec/sas/wpaper/20131_Ghassan_Fachin_Guendoz.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Caporale, Guglielmo Maria & Çatık, Abdurrahman Nazif & Helmi, Mohamad Husam & Menla Ali, Faek & Tajik, Mohammad, 2020. "The bank lending channel in the Malaysian Islamic and conventional banking system," Global Finance Journal, Elsevier, vol. 45(C).
    2. Guglielmo Maria Caporale & Abdurrahman Nazif Catik & Mohamad Husam Helmi & Faek Menla Ali & Mohammad Tajik, 2016. "The Bank Lending Channel in a Dual Banking System: Evidence from Malaysia," Discussion Papers of DIW Berlin 1557, DIW Berlin, German Institute for Economic Research.

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    Keywords

    Islamic Banks; Financial Crisis; Financial Stability; Z-score Model; Saudi Arabia.;
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