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Classification of banks according to their risk : Comparative measure between Islamic and conventional banks in Malaysia

Author

Listed:
  • Aldo Levy

    (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM] - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université)

  • Hichem Rezgui
  • Mouna Kessentini

Abstract

This paper aims to investigate whether the risk of Islamic banks is different from the risk of conventional bank. We hypothesize that Islamic banks are more risky. In order to test this hypothesis, we use a classification method (Multilevel Interior Growing Self-Organizing Maps) for a sample of 12 Malaysian banks (8 Islamic banks and 4 conventional banks). This method allows us to identify homogeneous categories which include banks with the same level of credit risk and liquidity risk. Our analysis shows that Islamic banks have a high-level risks comparing to the conventional banks. The main advantage of our method is that it permits to directly know the level of risks of a new bank which not included in the sample.

Suggested Citation

  • Aldo Levy & Hichem Rezgui & Mouna Kessentini, 2015. "Classification of banks according to their risk : Comparative measure between Islamic and conventional banks in Malaysia," Post-Print halshs-01278083, HAL.
    • Handle: RePEc:hal:journl:halshs-01278083
    as

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