This paper investigates how banking system stability is affected when we combine Islamic and conventional finance under the same roof. We compare systemic resilience of three types of banks in six GCC member countries with dual banking systems: fully-fledged Islamic banks (IB), purely conventional banks (CB) and conventional banks with Islamic windows (CBw). We employ market-based systemic risk measures such as MES, SRISK and CoVaR to identify which sector is more vulnerable to a systemic event. We also compute weighted average GES to determine which sector is most synchronised with the market. Moreover, we use graphical network models to determine the most interconnected banking sector that can more easily spread a systemic shock to the whole system. Using a sample of observations on 79 publicly traded banks operating over the 2005–2014 period, we find that CBw is the least resilient sector to a systemic event, it has the highest synchronicity with the market, and it is the most interconnected banking sector during crisis times.

This paper investigates the pricing of insolvent banks in the U.S. that are sold under the purchase and assumption resolution method of the Federal Deposit Insurance Corporation (FDIC). We consider quarterly data for 444 acquisitions of insolvent U.S. banks between 2009 and 2016. We find that acquirers not only pay higher prices for insolvent banks with larger core deposits, as has been highlighted by the literature (and is consistent with the FDIC’s beliefs), but also for those banks with larger branch networks that are less dispersed geographically. When the acquirers bid (separately) for the assets of the insolvent banks, they place a positive value on the number of branches of the insolvent bank, but appear to be insensitive to geographic dispersion. Acquirers also pay more for banks with a national charter. The results additionally show that failed banks are most likely to be acquired by relatively large and highly capitalized banks whose organic growth is not affected in the years following the acquisition. Overall, our findings contribute to a better understanding of the implications of the purchase and assumption resolution method for the FDIC and for the banking industry.