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The banking sector around the world is beneath enormous pressure because of the evolving COVID-19 scenario and its policy responses. This study investigates how this pandemic impacts the systemic risk of Islamic business banks (ICBs) and conventional commercial banks (CCBs) in Indonesia. This observation affords empirical proof concerning the estimation and resolution of systemic risk. In unique, using the spillover measure, we discover a substantial increase in systemic risk in a few of the sample banks. This look gives an in-depth contribution to the literature and suggests various coverage pointers, covered systematically figuring out critical establishments and supplied testimony approximately the blessings of coverage responses in addressing systemic risks.

This study aims to analyze the challenges of the dual banking system during macroeconomic fluctuations. By using the default probability mapping method and macroeconomic stress testing, we can measure the stability of the financial system through credit calculation. In addition, by using the stress test method, we can find information about the characteristics of the financial system in crises and its financial-related assistance in the financial system. Considering if a financial system can detect it early, the government can take preventative measures to minimize the consequences. The results of the study show that Islamic banking has a higher default probability than conventional banking. So it can be concluded that the current stability of Islamic banking is not better than conventional banking. Our findings suggest that inflation is only a macroeconomic variable that has a high level of sensitivity to the default probability of banks. Moreover, Islamic and conventional banking have different responses to the sensitivity of inflationary interventions.