Shari'a-Based Ethics in Relation to Governance and Financial Stability of Banks

Good and ethical governance has been proposed as one of the drivers of economic growth and development in the monetary system of countries and has attracted the opinion of policymakers in the banking system in order to improve productivity and financial stability. The present article, while classifying ethics, examines its function in the relationship between governance and financial stability of banks. In other words, Islamic and conventional banks were considered as the environment of ethics based on Sharia and conventional ethics, respectively.

The research method was quantitative-descriptive-correlation. The statistical population of the present study consists of banks in countries that, in addition to conventional banking, also provide Islamic banking services to customers. The research sample included banks from the United Arab Emirates, Malaysia, Qatar, Bahrain and Indonesia, and Iran was added to the research environment due to special conditions in the monetary system. The sampling method was stratified random. By referring to documents, records and library studies, data were collected and the results were analyzed by performing regression statistical test.

The results show that in banks where Sharia-based ethics prevail, political stability and government effectiveness have a significant relationship with financial stability. Also, in banks where conventional ethics prevail, the rule of law and the control of corruption have a significant relationship with financial stability.

Increasing the quality of public services, reducing bureaucracy, eliminating the direction of financial resources through political pressures and controlling sectarian differences will help the financial stability of Islamic banks and strengthen Sharia-based ethics. Conventional banks can also contribute to financial stability and improve ethics by focusing on stakeholder self-control.