Towards Building an Early Warning Model to Predict the Financial Crises of Jordanian Islamic Banks

Abstract

This study aimed to build an early warning model to predict financial crisis at the Jordanian Islamic banks during (2000-2013). So, the study included thirteen independent variables, and four dependent variables.

Among the most important findings of the study there is no significant Effect of the economic indicators and indicators of the financial performance of the financial crisis, as measured by the real exchange rate due to growing confidence in the dinar, achievements of monetary stability reflected positively on the Jordanian economy, and the international reserves due to the central bank's policy to keep a basket of foreign currencies as reflected positively on the Jordanian economy. While total bank deposits is due to the adoption of central bank control policy and legislative prudent on the banking system, an increasing demand for Islamic banks in light of the crisis, which was reflected positively on the increased size deposits in particular. Finally, total bank reserves is due to the retention of Islamic banks with capital and high reserves, protected from exposure to any financial crisis. The most important, as recommended by the study, is that Islamic banks are advised to use these four models as an early warning system protects them from exposure to any risks arising from the financial crisis.