IDEAS home Printed from https://ideas.repec.org/p/ris/irtiwp/1433_005.html
   My bibliography  Save this paper

The Impact of Credit Risk Transfer on Islamic Banks Lending Behavior and Financial Stability

Author

Listed:
  • Elzahi , Abd elrahman

    (The Islamic Research and Teaching Institute (IRTI))

  • Ali, Saaid

    (The Islamic Research and Teaching Institute (IRTI))

Abstract

The recent financial crisis has further emphasized the importance of investigating the application of risk management techniques in Islamic banks. Previous conventional studies have showed that banks can be less risk averse in their credit portfolio management when they apply any sort of risk transfer techniques. In this study, data from 60 Islamic banks have been collected and analyzed in a panel pooled framework to investigate the impact of credit risk transfer (CRT) techniques on the lending behavior of Islamic banks. Results have showed that Islamic banks may expand their lending portfolios when practicing some sort of credit risk transfer techniques. These results are consistent with the results achieved in conventional banking studies. Hence the study concludes that despite the theoretical differences, Islamic banks may behave like conventional banks when using some sort of risk management methods. Given the recent global financial instability, the results of this study give strong policy implications to the Islamic banks management as well as to the regulators.

Suggested Citation

  • Elzahi , Abd elrahman & Ali, Saaid, 2015. "The Impact of Credit Risk Transfer on Islamic Banks Lending Behavior and Financial Stability," Working Papers 1433-5, The Islamic Research and Teaching Institute (IRTI).
    • Handle: RePEc:ris:irtiwp:1433_005
    as

    Download full text from publisher

    File URL: http://www.irti.org/English/Research/Documents/336.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. National Bank of Kazakhstan, 2006. "Financial Stability Report of Kazakhstan, 2006," Financial Stability Reports(National Bank of Kazakhstan), National Bank of Kazakhstan, number 2006.
    2. National Bank of Kazakhstan, 2011. "Financial Stability Report of Kazakhstan, 2011," Financial Stability Reports(National Bank of Kazakhstan), National Bank of Kazakhstan, number 2011.
    3. Chiesa, Gabriella, 2008. "Optimal credit risk transfer, monitored finance, and banks," Journal of Financial Intermediation, Elsevier, vol. 17(4), pages 464-477, October.
    4. National Bank of Kazakhstan, 2008. "Financial Stability Report of Kazakhstan, 2008," Financial Stability Reports(National Bank of Kazakhstan), National Bank of Kazakhstan, number 2008.
    5. Wagner, Wolf & Marsh, Ian W., 2006. "Credit risk transfer and financial sector stability," Journal of Financial Stability, Elsevier, vol. 2(2), pages 173-193, June.
    6. Allen, Franklin & Carletti, Elena, 2006. "Credit risk transfer and contagion," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 89-111, January.
    7. Elzahi Saaid Ali, Abd Elrahman, 2011. "Islamic banking structures : implications for risk and financial stability (Research Paper)," Occasional Papers 242, The Islamic Research and Teaching Institute (IRTI).
    8. National Bank of Kazakhstan, 2007. "Financial Stability Report of Kazakhstan, 2007," Financial Stability Reports(National Bank of Kazakhstan), National Bank of Kazakhstan, number 2007.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maarten van Oordt, 2017. "Credit Risk Transfer and Bank Insolvency Risk," Staff Working Papers 17-59, Bank of Canada.
    2. Ongena, Steven & Kara, Alper & Marqués-Ibáñez, David, 2011. "Securitization and lending standards: evidence from the wholesale loan market," Working Paper Series 1362, European Central Bank.
    3. Arping, Stefan, 2014. "Credit protection and lending relationships," Journal of Financial Stability, Elsevier, vol. 10(C), pages 7-19.
    4. Helder Ferreira de Mendonça & Vívian Íris Barcelos, 2021. "Securitization of assets and risk transfer in a large emerging market: Evidence from Brazil," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 580-605, October.
    5. Cerasi, Vittoria & Rochet, Jean-Charles, 2014. "Rethinking the regulatory treatment of securitization," Journal of Financial Stability, Elsevier, vol. 10(C), pages 20-31.
    6. van Oordt, Maarten R.C., 2014. "Securitization and the dark side of diversification," Journal of Financial Intermediation, Elsevier, vol. 23(2), pages 214-231.
    7. Ahn, Jung-Hyun & Breton, Régis, 2014. "Securitization, competition and monitoring," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 195-210.
    8. James R. Thompson, 2007. "Counterparty Risk In Insurance Contracts: Should The Insured Worry About The Insurer?," Working Paper 1136, Economics Department, Queen's University.
    9. Victoria COCIUG & Victoria POSTOLACHE (DOGOTARI), 2015. "Implications Of Credit Risk Transfer On Bank Performances," ECONOMY AND SOCIOLOGY: Theoretical and Scientifical Journal, Socionet;Complexul Editorial "INCE", issue 3, pages 87-95.
    10. Roman Inderst & Sebastian Pfeil, 2013. "Securitization and Compensation in Financial Institutions," Review of Finance, European Finance Association, vol. 17(4), pages 1323-1364.
    11. Giovanni Calice & Christos Ioannidis & Julian Williams, 2012. "Credit Derivatives and the Default Risk of Large Complex Financial Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 42(1), pages 85-107, October.
    12. Hakenes, Hendrik & Schnabel, Isabel, 2010. "Credit risk transfer and bank competition," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 308-332, July.
    13. Frank Heyde & Ulrike Neyer, 2010. "Credit Default Swaps and the Stability of the Banking Sector-super-," International Review of Finance, International Review of Finance Ltd., vol. 10(s1), pages 27-61.
    14. Kiff, John & Kisser, Michael, 2014. "A shot at regulating securitization," Journal of Financial Stability, Elsevier, vol. 10(C), pages 32-49.
    15. Li, Zhe & Sun, Jianfei, 2011. "Bank competition, securitization and risky investment," MPRA Paper 34173, University Library of Munich, Germany.
    16. Chen, Naixi & Fan, Hong, 2023. "Credit risk contagion and optimal dual control—An SIS/R model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 210(C), pages 448-472.
    17. Gabriella Chiesa, 2015. "Bankruptcy Remoteness and Incentive‐compatible Securitization," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 24(2-3), pages 241-265, May.
    18. Liu, Luke, 2011. "Securitization and moral hazard: Does security price matter?," MPRA Paper 35004, University Library of Munich, Germany.
    19. Kara, Alper & Marques-Ibanez, David & Ongena, Steven, 2016. "Securitization and lending standards: Evidence from the European wholesale loan market," Journal of Financial Stability, Elsevier, vol. 26(C), pages 107-127.
    20. Wagner, Wolf, 2008. "The homogenization of the financial system and financial crises," Journal of Financial Intermediation, Elsevier, vol. 17(3), pages 330-356, July.

    More about this item

    Keywords

    Financial Stability; Islamic Banks Risk Management;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:irtiwp:1433_005. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Research Division (email available below). General contact details of provider: https://edirc.repec.org/data/irisbsa.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.