The Determinants of The Bank Regulation and Supervision on The Efficiency of Islamic Banks in Different Country's Income Level

• Published in: Journal of Asian Finance, Economics and Business
• Main Author: MOHD NOOR N.H.H.; BAKRI M.H.; WAN YUSOF W.Y.R.; MOHD NOOR N.R.A.; ABDULLAH H.; MOHAMED Z.
• Format: Article
• Language: English
• Published: Korea Distribution Science Association (KODISA) 2020
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85098518813&doi=10.13106%2fJAFEB.2020.VOL7.NO12.721&partnerID=40&md5=33314aff83d841cd1ab441c85bd95ece

This study investigates the impact of the country's governance on the revenue efficiency of 108 Islamic banks from 26 countries offering‎Islamic banking and finance products services. The technical efficiencies of individual Islamic banks have been analyzed using the Data‎Envelopment Analysis method. The data will be pooled across the selected countries and utilize the intermediation approach. The Ordinary‎Least Square estimation method is employed to examine the impact of country supervision and regulation on the technical efficiency of‎Islamic banks. As robustness check, the study examines the impact of the level of bank regulations and supervision on the efficiency of‎Islamic banks operating in different income-level countries. The results found that the stricter the supervisory power, the less strict capital‎requirement, the tighter the restrictions on non-banking activities, and the stricter the private monitoring enhance statistically significantly‎the level of efficiency of Islamic banks. In upgrading the regulations and supervision of the Islamic banks, the existing regulatory framework‎based on the Basel Committee on Banking Supervision (BCBS) must be complemented with the prescriptions on Islamic banking or Shariah‎compliance diligently, so that the Islamic banks could be regulated accurately and further improve the technical efficiency of their operations. © 2020. All Rights Reserved.