CONCEPTUAL PROPOSAL FOR FUTURE MACROPRUDENTIAL FRAMEWORK UNDER A DUAL FINANCIAL SYSTEM IN INDONESIA

Muhamed Zulkhibri • Abdul Ghafar Ismail
Sutan Emir Hidayat
Editors

Macroprudential Regulation
and Policy for the Islamic
Financial Industry

Theory and Applications

Contents

Part I Institutional Framework for Macroprudential
in Islamic Banking System
1 Macroprudential Policy and Regulation in a Dual
Banking System: An Exploratory Perspective
Muhamed Zulkhibri and Ismaeel Naiya
2 Doctrinal Challenge for Islamic Banking on Macroprudential
Regulations: A Religion-Regulation Mismatch 2.0
Etsuaki Yoshida
3 Conceptual Proposal for Future Macroprudential

Framework Under a Dual Financial System in Indonesia
Ascarya, Adiwarman A. Karim, Siti Rahmawati, Masyhudi Muqorrobin,
and Dimas Bagus Wiranatakusuma

25

35

Part II Macroprudential Policy, Systemic Risks and Financial
Stability in Islamic Financial Industry
4 Risk Management Methodologies: An Empirical
Macro-prudential Approach for a Resilient Regulatory
Framework for the Islamic Finance Industry
Samir Alamad
5 Competitive Condition and Market Power of Islamic
and Commercial Conventional Banks in Indonesia
Cupian and Muhamad Abduh
6 Early Warning Indicators and Macroprudential Policy Tools
Hazik Mohamed
7 A Proposed Formula for Reserve Requirement-Financing

to Deposit Ratio: The Gase of Islamic Banking in Indonesia
Rifki Ismal and Sutan Emir Hidayat

57

79
101

121

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Contents

8 Testing of the Procyclicality of Islamic and Conventional
Banks in Indonesia
Ascarya, Siti Rahmawati, and Adiwarman A. Karim

133

9 Short-Term Liquidity Management Mechanisms
in the Absence of Islamic Interbank Loan Markets
Magomet Yandiev

153

Contributors

Part III Experiences in Implementing Macroprudential
Policy in a Dual Banking System
10 Macroprudential Analysis of Financial Crisis Impacts
on Banks' Soundness: Evidence from Pakistan
Azam Ali and Noraini Ariffin

163

11 Regulatory Framework for Islamic Finance:
Malaysia's Initiative
Siti Muawanah Lajis, Obiyathulla Ismath Bacha, and Abbas Mirakhor

177

12 Islamic Finance and Macroprudential Policy:
The Case of Iranian Banking System
Mehdi Hadian

Zuriyati Ahmad Universiti Teknologi MARA, Selangor, Malaysia
193

14 Socioeconomic Development and Its Effect on Performance
of Islamic Banks: Dynamic Panel Approaches
Mohammad Ashraful Ferdous Chowdhury, Md. Mahmudul Haque,
Syed Othman Alhabshi, and Abul Mansur Mohammed Masih
15 Macroprudential Tools and Its Relationship
with Monetary Policy Tools
Abdul Ghafar Ismail and Zuriyati Ahmad

Samir Alamad Aston Business School, Aston University, Birmingham, UK
Syed Othman Alhabshi International Centre for Education in Islamic Finance
(INCEIF), Kuala Lumpur, Malaysia

Part IV Interplay Between Macroprudential Policy
with Other Markets
13 Indonesia Shari'ah Compliance Stock Index Responses
Toward Macroprudential and Monetary Policy
of Indonesian Central Bank
Helma Malini

Muhamad Abduh School of Business and Economics, Universiti Brunei
Darussalam, Bandar Seri Begawan, Brunei, Darussalam

Azam Ali State Bank of Pakistan, Karachi, Pakistan
Noraini Ariffin Kulliyyah of Economics and Management, International Islamic
University, Gombak, Malaysia
213

229

Ascarya Center for Central Banking Research and Education, Bank Indonesia,
Jakarta, Indonesia

Obiyathulla Ismath Bacha International Centre for Education in Islamic Finance
(INCEIF), Kuala Lumpur, Malaysia
Mohammad Ashraful Ferdous Chowdhury Shahjalal University of Science and
Technology, Sylhet, Bangladesh

245

Cupian Faculty of Economic and Business, Universitas Padjadjaran, Bandung,
Indonesia
Mehdi Hadian Faculty of Economic and Political Sciences, Shahid Beheshti
University, Tehran, Iran
Md. Mahmudul Haque International Centre for Education in Islamic Finance
(INCEIF), Kuala Lumpur, Malaysia
Sutan Emir Hidayat University College Bahrain, Manama, Bahrain

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