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We see spikes in unemployment rates and turbulence in the securities markets during the COVID-19 pandemic. Governments are responding with aggressive monetary expansions and large-scale economic relief plans. We discuss the implications on banks and the economy of prudential regulatory intervention to soften the treatment of non-performing loans and ease bank capital buffers. We apply these easing measures on a sample of Globally Systemically Important Banks (G-SIBs) and show that these banks can play a constructive role in sustaining economic growth during the COVID-19 pandemic. However, softening the treatment of non-performing loans along with easing capital buffers should not undermine banks' solvency in the recovery period. Banks should maintain usable buffer in the medium-term horizon to absorb future losses, as the effect of COVID-19 on the economy might take time to fully materialise.

We see spikes in unemployment rates and turbulence in the securities markets during the COVID-19 pandemic. Governments are responding with aggressive monetary expansions and large-scale economic relief plans. We discuss the implications on banks and the economy of prudential regulatory intervention to soften the treatment of non-performing loans and ease bank capital buffers. We apply these easing measures on a sample of Globally Systemically Important Banks (G-SIBs) and show that these banks can play a constructive role in sustaining economic growth during the COVID-19 pandemic. However, softening the treatment of non-performing loans along with easing capital buffers should not undermine banks' solvency in the recovery period. Banks should maintain usable buffer in the medium-term horizon to absorb future losses, as the effect of COVID-19 on the economy might take time to fully materialise.

Cet article compare les effets de divers ratios de fonds propres réglementaires fondés ou non sur la pondération des actifs par le risque sur la profitabilité et l'efficience de banques à la fois islamiques et conventionnelles. Pour ce faire, un échantillon composé de 656 banques de 1999 à 2013 est mobilisé. Les résultats indiquent que les ratios de fonds propres améliorent la profitabilité et l'efficience des deux modèles de banques. De plus, les ratios de fonds propres ont un effet plus favorable sur la performance des banques islamiques qui relèvent de la réglementation proposée par le Conseil des services financiers islamiques (IFSB) que de celles qui dépendent du Comité de Bâle sur le contrôle bancaire. Classification JEL : G21, G28, P43, P47.

Using a sample of banks operating in 24 countries, we provide robust evidence that stronger creditor rights are associated with higher capital adequacy ratios of conventional banks but not of Islamic banks. Such results are more effective on bank core capital, suggesting that bank managers tend to increase pure equity to signal better monitoring efforts and avoid losing control in an environment characterized by strong creditor protection. Except in less religious countries with less competitive markets, Islamic banks appear to be less affected by creditor protection possibly because of the profit loss sharing (PLS) principle that considers depositors as investors who agree to share profits and losses with the bank, thus making the effect of creditor protection weaker or irrelevant in an Islamic banking context. JEL classification: G21, G28, G32, K22

Using a sample of banks operating in 24 countries, we provide robust evidence that stronger creditor rights are associated with higher capital adequacy ratios of conventional banks but not of Islamic banks. Such results are more effective on bank core capital, suggesting that bank managers tend to increase pure equity to signal better monitoring efforts and avoid losing control in an environment characterized by strong creditor protection. Except in less religious countries with less competitive markets, Islamic banks appear to be less affected by creditor protection possibly because of the profit loss sharing (PLS) principle that considers depositors as investors who agree to share profits and losses with the bank, thus making the effect of creditor protection weaker or irrelevant in an Islamic banking context. JEL classification: G21, G28, G32, K22

We investigate whether and how political systems affect the financial soundness of conventional and Islamic banks. Using factors extracted from principal component analysis, we find that Islamic banks underperform their conventional counterparts in more democratic political systems but outperform them in hybrid and Sharia'a-based legal systems. The findings reflect the challenges Islamic banks face in Western countries in terms of perception, financial infrastructure, and regulatory constraints while mirroring the recognition of their specificities and their cultural and religious compliance with Sharia'a law in Muslim countries. The findings are robust to a battery of alternative estimation techniques and methods of correcting standard errors.