Abstract:

Participation banks seem to be free from interest rate risk because of the methods they use. However, participation banks, along with other risks, are subject to interest rate risks, because of dual banking system and customer profile similarity. Thus, participation banks that are in competition with classic banks, try and keep their premiums close to other banks’ interest rates. In this study, the determinants of Turkish participatory banks' funding sources were analyzed with Johansen cointegration analysis between 2005 to 2013. According to the information based on the study, a positive relation has been detected from interest rates towards profit rates. Furthermore, it is found that both premium rates and interest rates affect the participation fund volume of participatory banks. These findings imply that there is interaction between participatory banks and classic banks.

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