Factors influencing capital adequacy ratio in mena region Islamic versus conventional banks / Zainab Yousry Roshdy Alsayed Gabr ; Supervised Osama Abdelkhalek Elansary

Thesis (M.Sc.) - Cairo University - Faculty of Commerce - Department of Business Administration

Capital adequacy rules proposed by Basel Committee for Banking Supervision (BCBS) provide enhancement to the international financial stability and soundness. The adherence to these rules by all the banking system improves governance and management standardization. Islamic Financial Services Board (IFSB) tried to compromise between Basel guidelines and Islamic banks{u2019} specificities. However, its standards are not completely adopted by all Islamic banks (IBs) which still follow Basel guidelines in many jurisdictions and as reported by accredited databases. This research examines the factors that influence capital adequacy ratio (CAR) in Islamic and conventional banks (CBs) and to what extent these determinants may vary between both banking systems. To test CAR determinants the Generalized Method of Moments (GMM) method is applied using 38 IBs and 75 CBs in 10 MENA countries during 2009-2013. CAR is used as a dependent variable and is measured by the Basel II framework. The independent variables are: profitability 2ROA3; liquidity risk 2LDR-FDR3; credit risk 2NPL-NPF3; bank size 2SIZE3; deposits to assets 2DAR3; operational efficiency 2OEOI3; portfolio risk 2RAR3; and macro-economic variables (gross domestic product 2GDP3 and average world governance indicators 2WGI3 for each country). The results of the regression analysis show that both IBs and CBs have a significant association between CAR and (SIZE, OEOI, and GDP) and CAR is affected retroactively on the long-run. However, the results of IBs also show a significant association between CAR and deposits to assets ratio. In CBs there is an association between CAR and (profitability, credit risk, and portfolio risk)

Issued also as CD