Title: Exploring the relationship between explicit deposit insurance, Islamic banks, and financial stability: a comparative analysis

Authors: Houssem Ben-Ammar

Addresses: Faculty of Economic Sciences and Management of Sousse, Research Laboratory for Economy, Management and Quantitative Finance, IHEC – University of Sousse 4054, Tunisia

Abstract: Using a sample of 47 Islamic and 98 conventional banks operating in ten countries over the period 1999-2019, we empirically investigate the effectiveness of the presence of explicit deposit insurance schemes (DIS) on the financial stability of conventional and Islamic banks. While Islamic banks seem to exhibit a relatively lower financial stability during the sample period, our results suggest that explicit deposit insurance enhances banks' stability. Interestingly, three out of the five CAMEL factors, namely management capability, earnings and liquidity, play a moderator role through which explicit deposit insurance and the financial stability of Islamic banks are related.

Keywords: financial stability; deposit insurance; Islamic banks; CAMEL.

DOI: 10.1504/AAJFA.2024.140959

Afro-Asian Journal of Finance and Accounting, 2024 Vol.14 No.5, pp.605 - 625

Received: 16 Feb 2023
Accepted: 22 May 2023
Published online: 04 Sep 2024 *

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