For certain asset classes, liquidity will be affected if you have to hold the asset up to a specified period. Also the markets for these assets must be there to ensure liquidity. Like a property asset, it is not as liquid as equity. If under Islamic principles these assets cannot be disposed till maturity, then its liquidity would be affected.

Dear Imronjana Syapriatama,

In my opinion, when determining the difference, a specific problem should be referred to the fundamental foundations of financial system security, reliability of banking procedures, including the credit risk management process in individual banks in connection with the issue of business ethics, corporate social responsibility, limiting the scale of information asymmetry between banks and their clients, compliance with the principles of sustainable development, etc. The ideal is sustainable banking, in which reliable and constantly improved banking procedures, developed credit risk management systems, IT systems, operational systems, cybercrime in online banking, etc. and loans granted on the basis of corporate social responsibility, business ethics, i.e. the excessive cost of credit and the lack of information asymmetry by the bank, mean that banks play an important pro-development role in the growing economy. In this situation, banks are prosocial institutions and the risk of a financial crisis is very small. For the banking system to operate in such a formula, it is necessary to improve the control system and institutions supervising banks, which continually and permanently verifies whether banks operate according to the above principles, or adapt their product offers, procedures and IT systems to developing information, internet and Industry 4.0 technologies . This is important because in the current era of the growing importance of the Internet, it is not enough to offer loans via the Internet as part of electronic online and mobile banking. Banks should do it safely, i.e. so that they and themselves do not expose themselves to the high risk of cybercrime and not to generate unnecessary costs and offer credit and other products on partner terms, taking into account not only their business goals but also the financial security of clients. For example, analysis of financial liquidity, including the relationship between individual items of liabilities and assets in banks' balance sheets, verification of the economic and financial situation of the bank's counterparties and clients, economic environment and factors determining changes in the economic situation, relations with other categories of financial risk and other categories of risk (primarily credit, currency, debt, operational, market, IT risk, significant fluctuations in profitability, etc.), assessment of financial liquidity risk by comparing e.g. loans with deposits taking into account the periods of operation of individual financial transactions, the level of accumulated financial earmarked reserves, etc. may also be carried out to diagnose financial problems. It can act as one of the important warning factors against the possible occurrence of a financial crisis in a given economic entity, including in a bank, i.e. it can be one of the important early warning indicators. If the analysis of financial liquidity is used as one of the auxiliary instruments to diagnose the scale and / or level of the financial system security bank, the reliability of implementation of banking procedures, including the process of credit risk management in individual banks in connection with the issue of business ethics, corporate social responsibility, limiting the scale of information asymmetry between banks and their clients, complying with the principles of sustainable development, etc., then it can also be helpful in distinguishing significant differences between specific models and banking systems, taking into account the realities of financial issues. From these analyzes, it may turn out that what is a standard in one model of the banking system is in another banking system that individual commercial banks are only trying to pursue this standard or only formally have these standards defined as strategic goals to which they are formally and in real terms certain goals are largely unattainable due to the adopted specific credit policy.

Best Regards, Have a nice day,

Dariusz Prokopowicz

Liquidity of Islamic banks is very similar to conventional. Financial statements of Islamic banks are not significantly different from conventional, the difference is in the process of Islamic banks.

Can you share a balance sheet of an Islamic bank? I do not have any information to help you.

Financially speaking liquidity is a term associated with cashing out from your investments.For banks liquidity results from a depositor's cash with the bank.In a layman's terms liquidity for any bank would be it's ability in meeting its short term financial obligations as they come due (mostly 30 day cash flows). For details suggest pls refer liquidity norms specified under Basel III for bank's tier 1 and tier 2 minimum capital adequacy percents.

It's not really different in Islamic banks since the returns change from paying interest to profit and loss sharing principle.Secondly I have noticed that the profit or loss sharing rates in many of these Islamic banks run pretty close to conventional banks interest rate.

For certain asset classes, liquidity will be affected if you have to hold the asset up to a specified period. Also the markets for these assets must be there to ensure liquidity. Like a property asset, it is not as liquid as equity. If under Islamic principles these assets cannot be disposed till maturity, then its liquidity would be affected.

My opinion: Conventional liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity is about how big the trade-off is between the speed of the sale and interest will be added to it while Islamic liquidity of assets does not attract interest and more so it more profitable to both the seller and the buyer of the assets i.e meeting @ the Equilibrium ...Thanks

Liquidity is a characteristic of assets. Solvency means ability of an entity to pay he debts. Liquidity of an entity therefore means how fast it can be sold to other owner(s). From both terms therefore there cannot be a difference between Islamic and Conventional banks. The main issue is their capital adequacy.

There is no great difference between liquidity in islamic banks and liquidity in conventional banks. The only difference we can consider is interms of the repayment of loans, where by interest are paid in conventional banks while profits are shared in islamic banks. So in terms of liquidity analysis, the difference is the presence of interest in the financial statements of conventional banks and its absence in the financial statements of islamic banks.