This paper investigates the impact of the Net Stable Funding Ratio (NSFR) on the financial stability of Islamic banks. Using data from 136 Islamic banks across 30 jurisdictions between 2000 and 2013, the study calculates a modified NSFR based on the Islamic Financial Services Board (IFSB) guidelines, which account for the unique aspects of Islamic banking. The empirical findings suggest a positive relationship between the modified NSFR and the financial stability of Islamic banks, although the marginal impact diminishes with increasing bank size. Robustness checks using alternative stability measures and estimation models validate the IFSB's modified NSFR as a regulatory measure for Islamic banks, highlighting its importance in promoting financial stability within the Islamic banking sector. Desklib offers a wealth of resources for students studying finance, including similar reports and solved assignments.
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