Skip to content

Research at St Andrews

Heterogeneous market structure and systemic risk: evidence from dual banking systems

Research output: Contribution to journalArticle


Pejman Abedifar, Paolo Giudici, Shatha Qamhieh Hashem

School/Research organisations


This paper investigates how banking system stability is affected when we combine Islamic and conventional finance under the same roof. We compare systemic resilience of three types of banks in six GCC member countries with dual banking systems: fully-fledged Islamic banks (IB), purely conventional banks (CB) and conventional banks with Islamic windows (CBw). We employ market-based systemic risk measures such as MES, SRISK and CoVaR to identify which sector is more vulnerable to a systemic event. We also compute weighted average GES to determine which sector is most synchronised with the market. Moreover, we use graphical network models to determine the most interconnected banking sector that can more easily spread a systemic shock to the whole system. Using a sample of observations on 79 publicly traded banks operating over the 2005–2014 period, we find that CBw is the least resilient sector to a systemic event, it has the highest synchronicity with the market, and it is the most interconnected banking sector during crisis times.


Original languageEnglish
Pages (from-to)96-119
JournalJournal of Financial Stability
Early online date8 Nov 2017
Publication statusPublished - Dec 2017

    Research areas

  • Graphical network models, Islamic banking, Partial correlations, Systemic risk measures

Discover related content
Find related publications, people, projects and more using interactive charts.

View graph of relations

Related by author

  1. Lending, the poor, and Islamic scripture: Islamic finance versus welfare Islam

    Abedifar, P., Jun 2019, In : Journal of the American Academy of Religion. 87, 2, p. 460-482 23 p.

    Research output: Contribution to journalArticle

  2. How Informative Are Stock Prices of Islamic Banks?

    Abedifar, P., Bouslah, K. B. H., Hashem, S. & Song, L., 2019, 31 p.

    Research output: Working paper

  3. Non-interest income and bank lending

    Abedifar, P., Molyneux, P. & Tarazi, A., Feb 2018, In : Journal of Banking & Finance. 87, p. 411-426

    Research output: Contribution to journalArticle

  4. Finance-Growth Nexus and dual-banking systems: relative importance of Islamic banks

    Abedifar, P., Hasan, I. & Tarazi, A., Dec 2016, In : Journal of Economic Behavior and Organization. 132, Suppl., p. 198-215

    Research output: Contribution to journalArticle

  5. Islamic banking and finance: recent empirical literature and directions for future research

    Abedifar, P., Ebrahim, S., Molyneux, P. & Tarazi, A., Sep 2015, In : Journal of Economic Surveys. 29, 4, p. 637-670 34 p.

    Research output: Contribution to journalArticle

Related by journal

  1. Monetary policy and financial stability in the long run: a simple game-theoretic approach

    Cao, J. & Chollete, L., Feb 2017, In : Journal of Financial Stability. 28, p. 125-142 18 p.

    Research output: Contribution to journalArticle

ID: 251523028