Bissett School of Business would like to congratulate Osama El-Temtamy on having his paper accepted for presentation at the the 7th Spring Conference of the Multinational Finance Society in Chania, Crete, Greece in April 2019. Osama’s paper is entitled: Oil Price Plunge: Are Conventional and Islamic banks equally vulnerable?
“Oil Price Plunge: Are Conventional and Islamic Banks Equally Vulnerable?”
Ghulame Rubbaniy – Zayed University, United Arab Emirates
Osama El-Temtamy – Mount Royal University, Canada
A. W. Khan – University of Evansville, USA
Abida Perveen – Comsats University Islamabad, Pakistan
In response to the recent debate on the vulnerability of the banking industry to oil price plunge, this article investigates the effect of oil price plunge on credit and insolvency risks of banking industry at aggregate level, across banks’ specializations and at country level. Our findings show that falling oil prices significantly increase the credit risk for the banking industry in the GCC region and particularly for banks operating in Kuwait, Qatar, Saudi Arabia and United Arab Emirates; however, falling oil prices do not affect credit risk of Islamic banks. Our analysis shows that black gold’s price plunge does not increase the insolvency risk of GCC banking industry nor across bank specializations and across Gulf countries using both accounting-based and market-based proxies of insolvency risk. We argue that bailout packages by the wealth funds to the GCC banks is a probable reason for counter intuitive protection against solvency risk due to negative oil price shocks.