The Funding Liquidity Risk and Bank Risk: A Review on the Islamic and Conventional Banks in Pakistan
The Prime objective of the current study is to discuss the link between the funding liquidity risk and bank risk for Islamic and conventional of Pakistan. The international financial system has been implemented in the banking system of Pakistan. Irrespective of some unique aspects of the market, significant influence has been received from the internal banking system. Two systems are being used in the banking sector of Pakistan, which includes Islamic banking and traditional banking system. The traditional system of banking involves interest on money. The depositor receives a specific amount over his/her deposits. However, the Islamic banking system is based on Shariah rules and policies. A major gap on liquidity research is that there is inconsistency in the relationship between funding liquidity risk and bank risk. This has resulted in different researchers giving conflicting views on the significance of various factors that influence liquidity risk or affected by the liquidty risk. The author has used the Scopus database to find the literature on the relationship between the funding liquidity risk and bank risk. The study is among the pioneer studies on the issues related to funding liquidity risk and liquidity risk, and will be helpful for the policy makers, bankers and practitioners.