A Capital Adequacy

A Capital fair to middling Framework for Moslem Banks: The get along to Reconcile Depositors Risk guy With Managers Risk Taking By Dadang Muljawan question Economist, Bank Indonesia Humayon A. Dar Lecturer, Department of Economics, Loughborough University, Loughborough, UK Maximilian J.B. mansion Professor, Department of Economics, Loughborough University, Loughborough, UK Corresponding source: Maximilian J. B. Hall Department of Economics, Loughborough University Loughborough LE11 3RG, united Kingdom Phone: +44 (1509) 222714 Fax : +44 (1509) 223910 email : M.J.Hall1@lboro.ac.uk 1 A Capital enough Framework for Islamic Banks: The guide to Reconcile Depositors Risk averting With Managers Risk Taking Abstract Conceptually, an Islamic brim has an equity- found hood structure, dominated by shareholders equity and investment deposits based on profit and difference sharing [PLS]. There is no need for cap adequacy regulations if the Islamic banks are unified as pure PLS-based organizations. However, due(p) to informational dissymmetry and risk aversion by investors, there shortly come through fixed cl prey liabilities on the Islamic banking ratio sheets.

This necessitates the pain in the neck of superior adequacy requirements, which aim at maintaining general stableness by achieving two essential objectives. First, keen regulations should value risk-averse (assumed unsophisticated) depositors. This requires a minimum equity capital cushion and an optimum assets-liabilities composition. Second, capital regulations should give the right incentives to shareholders to push prudent behavior by the banks. This requires analysis of the effect of fiscal participation by shareholders on Pareto optimality, and analysis of potential deportment by shareholders when facing monetary uncertainty. This paper combines modern banking possible action and principal-agent analysis to break a framework for an optimal capital structure for Islamic banks. The proposed capital regulation...If you want to get a full essay, fiat it on our website: Ordercustompaper.com

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