This study aims to analyze the effect of Third Party Funds (TPF), Capital Adequacy Ratio (CAR), Bank Age, Non-Performing Financing (NPF), and Return On Assets (ROA) on the level of risk-taking of Islamic banks in Indonesia and Malaysia. Risktaking in this study is proxied by Financing Asset Ratio (FAR) and Financing to Deposit Ratio (FDR). The data used in this study are the cross-ssection data of Islamic banks in Indonesia. Time-series data of 2010 to 2017 from each of the financial statements of Islamic banks in Indonesia and Malaysia act as research objects. This research uses the panel data regression method and the data run by STATA 12. Based on the analysis, The TPF and the CAR significantly impact the Credit and Liquidity Risk in both observed countries. CAR significantly influenced the credit risk, when the CAR goes up, it is resulted from the addition of equity due to the rise of NPF. Moreover, Indonesia's liquidity risk is caused by the mismatched nature of the Indonesian funding side. On the other hand, the credit risk in Malaysia rises whenever the TPF increase and the Liquidity is caused by the deposit taking and risk taking activity. The introduction of investment account by the Bank Negara Malaysia is among the factors of significant and negative results. This paper urges the Financial Services Authority (Otoritas Jasa Keuangan) to speed up the implementation of Investment Account product in Indonesian Islamic Bank since it will reduce the liquidity risk and at the end will decrease the credit risk