IslamicFinance.de

Switching from conventional ‘Western’ financial practices to Islamic banking gives distinct advantages to banks, with the change improving the liquidity and value of stocks. Researchers at the Universities of Birmingham and Brighton studied a merger that took place in Bahrain, between an Islamic bank and a conventional bank in the wake of financial crises that rocked the world between 2007 and 2009.

Their study showed that the 2009 acquisition of Bahrain Saudi Bank by the Islamic institution Al Salam Bank Bahrain (ASBB) prompted a significant increase in the liquidity of ASBB after adopting an Islamic banking system. Published in the Journal of International Financial Markets, Institutions and Money, the study looks at how the amalgamated bank operated after the merger, concluding that Islamic banking offered the institution significant advantages.

Bahrain-based lenders Al Salam Bank and Bahrain Saudi Bank said in a joint statement posted on the Bahrain stock exchange that the due diligence and evaluation is expected to be completed in the coming weeks. The planned merger would create a bank with combined market value of USD 400 mn.

The two banks said regulators and shareholders would be approached in April to approve the deal.

The two institutions are in the early stages exploring the possibility of a business combination through a share exchange with ASBB issuing shares to BSB shareholders. The combination is subject to approvals by the Boards and shareholders of both the institutions and regulators in Bahrain and Dubai it was revealed.