Findings from A. Alaabed and Co-Researchers in the Area of Risk Management Reported (Investigating risk shifting in Islamic banks in the dual banking…

Findings from A. Alaabed and Co-Researchers in the Area of Risk Management Reported (Investigating risk shifting in Islamic banks in the dual banking systems of OIC member countries: An application of two-step dynamic GMM)

By a News Reporter-Staff News Editor at Insurance Weekly News -- New research on Risk Management is the subject of a report. According to news reporting originating from Kuala Lumpur, Malaysia, by VerticalNews correspondents, research stated, "In the last five decades, advances in information technology and in financial innovations have made possible the emergence of an immense capacity for banks to switch regimes from risk transfer to risk shifting. The devastating power of this capacity was amply pronounced in the financial crisis of 2007/2008."

Our news editors obtained a quote from the research, "The fallout of which has intensified calls for a re-examination of current banking model and its risk management (or rather mismanagement). Risk shifting is, axiomatically, absent in an ideal Islamic financial system. The Islamic banking model, thus, provides unique paradigm with risk sharing at its core, potentially fostering financial inclusion and reducing the incidence of bank failures and the size of losses incurred by depositors and tax payers. However, the present formation of Islamic banking has grown out of conventional banking and reverse engineers many of its techniques and instruments. The main objective of this paper is to empirically investigate risk management in Islamic banks in dual banking systems in member states of the Organization of Islamic Countries. The two-step dynamic difference GMM is applied to cater for the nature of Islamic banking data, which is characterized by a larger dynamic panel and a smaller timeframe. Findings tend to indicate that Islamic banking has a limiting effect on risk shifting. The effect however is not sufficient to fully nullify the overall risk shifting incentives."

According to the news editors, the research concluded: "The evidence supports strengthening risk sharing and reforming Islamic banking configuration as the way forward."

For more information on this research see: Investigating risk shifting in Islamic banks in the dual banking systems of OIC member countries: An application of two-step dynamic GMM. Risk Management-Journal of Risk Crisis and Disaster, 2016;18(4):236-263. Risk Management-Journal of Risk Crisis and Disaster can be contacted at: Palgrave Macmillan Ltd, Brunel Rd Bldg, Houndmills, Basingstoke RG21 6XS, Hants, England.

The news editors report that additional information may be obtained by contacting M. Masih, INCEIF, Finance & Accounting, Kuala Lumpur 59100, Malaysia. Additional authors for this research include M. Masih and A. Mirakhor.

Keywords for this news article include: Kuala Lumpur, Malaysia, Asia, Risk Management.

Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2017, NewsRx LLC