A Comparative Study of Islamic and Conventional Banks Risk Management Practices: Empirical Evidence from Pakistan

Rehman, A.A., Benamraoui, A. and Dad, A.M. 2018. A Comparative Study of Islamic and Conventional Banks Risk Management Practices: Empirical Evidence from Pakistan. Journal of Banking Regulation. 19 (3), pp. 222-235. doi:10.1057/s41261-017-0046-z

TitleA Comparative Study of Islamic and Conventional Banks Risk Management Practices: Empirical Evidence from Pakistan
AuthorsRehman, A.A., Benamraoui, A. and Dad, A.M.
Abstract

While conventional bank risk management practices is well documented in the literature there is limited research devoted at comparing the risk management practices of Islamic and conventional banks and how the recent financial crisis affected the approach taken in each banking model to manage the risks. In this paper we use self-administered questionnaire to collect data from 150 bank senior managers and risk specialists from Pakistani conventional and Islamic banks to identify the main contributing factors to their risk management practices after the 2007-2008 financial crisis. The study results reveal that risk identification, risk assessment and analysis, credit risk analysis and risk governance are the most efficient and influential variables in explaining the risk management practices of Islamic banks. Whilst understanding risk management, credit risk analysis, and risk governance are the most significant and contributing variables in the risk management practices of conventional banks. Differences are also observed between Islamic and conventional banks in their liquidity risk analysis and risk governance. The results presented in this study are likely to benefit bank managers, investors, regulators, and policymakers as they will serve them as guide when developing, reformulating and overseeing the bank(s) existing risk management practices.

KeywordsIslamic banks, conventional banks, risk management practices, liquidity risk analysis, risk governance, Pakistan
JournalJournal of Banking Regulation
Journal citation19 (3), pp. 222-235
ISSN1750-2071
Year2018
PublisherSpringer
Accepted author manuscriptBank Risk Management Paper Final Version.pdf
Digital Object Identifier (DOI)doi:10.1057/s41261-017-0046-z
Web address (URL)https://link.springer.com/article/10.1057%2Fs41261-017-0046-z
Publication dates
Published online20 Jun 2017

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