What are the risks faced by Islamic banks?
The common risks faced both by Islamic and conventional banks are credit risk, market risk, operational risk and liquidity risk while unique risks such as displaced commercial risk and Shariah compliance risk are related to Islamic banks only.
Which of the following best describe risk management?
Risk management is the process of identifying, assessing and controlling threats to an organization’s capital and earnings. These risks stem from a variety of sources including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents and natural disasters.
How is Islamic banking different from conventional banking?
Conventional Bank treats money as a commodity and lend it against interest as its compensation. Islamic banking products are usually asset backed and involves trading of assets, renting of asset and participation on profit & loss basis.
How to manage the risk of Islamic banks?
The management of Islamic banks needs to create a risk. management environment by clearly identifying the risk objectives and strategies of an. institution and by establishing systems that can identify, measure, monitor and manage. various risk exposures.
What is Ahmed Habib’s book on Islamic banking?
Ahmed, Habib (2005), ‘Withdrawal risk, market discipline and efficiency in Islamic banking’, in TariqullahKhan and Dadang Muljawan (eds),Islamic Banking Stability: The Role of Risk Management, Regulation andSupervision, Islamic Research and Training Institute, Jeddah: Islamic Development Bank.
What are the risk identification and management techniques available to banks?
The techniques of risk identification and management available to the Islamic bankscould be of two types. The first type comprises standard techniques, such as risk report-ing, internal and external audit, GAP analysis, RAROC, internal rating and so on, whichare consistent with the Islamic principles of finance.
What are the asset and liability sides of Islamic banks?
The asset and liability sides of Islamic banks have unique risk characteristics. The Islamicbanking model has evolved to one-tier mudaraba with multiple investment tools. On theliability side of Islamic banks, saving and investment deposits take the form of profit-sharing investment accounts.