Purpose: The main aim of this study is to address the current gap in banking risk and efficiency literature by investigating risk and efficiency levels, identify risk and efficiency determinants. This thesis examines banking risk from one side and efficiency from another. The study also provides a comparative study between Islamic and conventional banking in an effort to provide clear, wide, understandable results. Methodology: The study’s methodology will be applied according to three main steps: first, estimating risk and efficiency levels. Second, investigating risk and efficiency determinants. And finally, identifying those potential variables affecting risk and efficiency through the SUR approach. Risk and efficiency levels are as follows; Risk figures by applying three potential risk indicators and efficiency levels through The Data Enveloping Analysis (DEA) approach. The study will also apply the methodology in two different scenarios: first, with Islamic banks; and second, with conventional banks. This step is taken in order to present comparable results amongst the different banking systems, which would produce clearer, wider and more understandable findings. Sample: The study covers a sample of major banks in the MENA area for the period spanning 2006–2015. Countries included Saudi Arabia, Kuwait, Qatar, Bahrain, United Arab Emirates, Jordan, Turkey, Egypt, Tunisia and Sudan. Results: After using two proxies to measure credit risk, the study has found that credit risk in Islamic and conventional banks is similar. A slight rise in loan loss reserve for conventional and a slight rise in non-performing loans in Islamic. The overall results show a similar credit risk levels in both Islamic and conventional banks in MENA. Insolvency risk was different, as Islamic banks reported higher risk levels compared to conventional banks. Z scores were higher in conventional banks indicating that insolvency risk in Islamic banks was higher. The study has found that efficiency levels in Islamic banks were also similar to efficiency levels in conventional banks. The Sharī‘ah’ compliance regulations did not affect the level of efficiency in Islamic banks performing in MENA. The study has investigated the impact of the global financial crisis on credit risk, insolvency risk and efficiency. The study found Islamic and conventional banks in MENA experienced an increase in credit risk. Both Islamic and conventional banks were less stable after the global financial with lower Z scores reported after the crisis. Banks in MENA were more efficient after the crisis. Efficiency scores were higher after the crisis compared to those reported before or during the crisis.

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