Islamic Banks Resilience to Systemic Risks : Myth or Reality Evidence from Bangladesh

This paper investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. We compare systemic resilience of three types of banks; fully-fledged Islamic banks (IB), purely conventional banks (CB) and conventional banks with Islamic windows (CBw). We use the market-based systemic risk measures of MES and SRISK to identify which type is more vulnerable to a systemic event. We also use ΔCoVaR to identify which type contributes more to a systemic event. Using a sample of observations on 27 publicly traded banks operating over the 2005-2014 period, we find that CB is the least resilient sector to a systemic event, and is the one that has the highest contribution to systemic risk during crisis times