Capital Adequacy for Islamic banks

Risk is an integral part of the business of banking. Islamic financial institutions, as with their conventional counterparts, are subject to many forms of risk. The purpose of capital adequacy regulations is to limit the probability that adverse outcomes would exceed the banks capacity to bear losses. The regulatory focus is on capital since capital alone provides a cushion for absorbing potential losses. This module examines the special factors affecting capital adequacy for Islamic banks.

• What is capital for a conventional bank?
• What is capital for an Islamic bank?
• What is the seniority of creditors for a conventional bank?
• What is the seniority of creditors for an Islamic bank?
• Basel II as applied to conventional banks
• Basel II as applied to Islamic banks
• Risk weightings
• The role of AAOIFI have:
• AAOIFI versus BASEL
• The IFSB capital adequacy rulings
• Regulatory and supervisory issues for Islamic banks