Aledjandro Lopez Mejia, Suliman Aljabrin, Rachid Awad, Mr. Mohamed Norat, and Mr. In W Song
more Stable than Conventional banks?
While in theory IBs are less susceptible to instability than conventional banks, in practice they are just as exposed to risks as CBs. In theory, the comparative advantage of IBs is its risk sharing feature (i.e., banks participate in the risks of their counterparties and investment depositors share the risk of the banking business). In practice, this advantage is neutralized as IBs end up paying to investment accounts holders competitive “market” returns regardless of their performance. Moreover, IBsshift away from profit