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Regulatory capital, default risk and efficiency: a comparative analysis between Islamic and conventional banks in the MENA region

Author

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  • Amal Bakour

    (Univ. Manouba, Tunisie)

Abstract

The main objective of this article is to study the effect of the regulatory environment on the behaviour of Islamic and conventional banks in 10 countries in the MENA region regarding the level of capital, the risk of default and banking efficiency. In other words, we seek to show the importance of the conventional and Islamic banking system in MENA countries and to assess the efficiency of these banks under the pressure of prudential regulations through a comparative analysis. Our results show that the riskiest banks are those with a high level of capital. Furthermore, the results suggest that the most profitable banks in the MENA region tend to increase their level of risk. We also find that a higher capital requirement encourages banks to take a higher risk with higher profitability.

Suggested Citation

  • Amal Bakour, 2023. "Regulatory capital, default risk and efficiency: a comparative analysis between Islamic and conventional banks in the MENA region," Bank i Kredyt, Narodowy Bank Polski, vol. 54(6), pages 607-624.
    • Handle: RePEc:nbp:nbpbik:v:54:y:2023:i:6:p:607-624
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    capital regulation; banking efficiency; default risk; simultaneous equations;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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