Financing Structures, Bank Specific Variables and Credit Risk ...

3.2 VariablesThe objective of this study is to determine factors influence in credit risk level ofMalaysian Islamic banks. Credit risk in this study has been defined as a ratio of nonperformingfinancing to total financing. The definition of non-performing financing isvaries among countries. In Malaysia non-performing financing is defined as;“(i) where the principal or interest/profit or both is past due for more than 90 days or3 months. In the case of revolving facilities (e.g. overdraft facilities), the facility shallbe classified as impaired where the outstanding amount has remained in excess ofthe approved limit for a period of more than 90 days or 3 months; or(ii) where the amount is past due or the outstanding amount has been in excess ofthe approved limit for 90 days or 3 months or less, the loan/financing exhibitsweaknesses8 that render a classification appropriate according to the bankinginstitution‟s credit risk grading framework.”Sources: Central Bank of Malaysia (2010).This study only used bank specific variables (BSV) as the independent variables.Five independent variables and three dummies are being regress against thedependent variable to determine the relationship between BSV and credit risk levelfor Malaysian Islamic banks. The independent variables are constructed using theinformation from balance sheet and income statement of each Islamic bank. Table 2explained the detail of the variables definition used in this study.6