Islamic Banks in Bangladesh Face Greater Asset Risks than Conventional Banks: Moody’s

Moody’s Investor Services (Moody’s) says Bangladesh’s Islamic banks, with fast-growing corporate exposure stemming from increased corporate financing, coupled with lower loss buffers than their peers, face greater asset risks in comparison to conventional private banks.

Why it Matters?

The profitability structure of Islamic banks is weaker than their peers due to the higher cost of funding and excess liquidity, resulting from Islamic banks being banned from holding interest-bearing bonds together with the scarcity of Shariah-compliant instruments. With the weaker profitability structure leading to lower-income buffers against financing losses, Islamic banks are thus becoming less able to withstand the effects of worsening quality of a...