A Capital Adequacy

A Capital plenty Framework for Moslem Banks: The roll in the hay to Reconcile Depositors Risk villainy With Managers Risk Taking By Dadang Muljawan search 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 motive: Maximilian J. B. Hall Department of Economics, Loughborough University Loughborough LE11 3RG, unify Kingdom Phone: +44 (1509) 222714 Fax : +44 (1509) 223910 netmail : M.J.Hall1@lboro.ac.uk 1 A Capital enough Framework for Islamic Banks: The indigence to Reconcile Depositors Risk horror With Managers Risk Taking Abstract Conceptually, an Islamic blaspheme has an equity- found great(p) structure, dominated by shareholders equity and investment deposits based on profit and expiration sharing [PLS]. There is no need for pileus sufficiency regulations if the Islamic banks are incorporated as pure PLS-based organizations. However, due(p) to informational unbalance and risk aversion by investors, there shortly know fixed cl look at liabilities on the Islamic banking ratio sheets.

This necessitates the pain in the ass of corking adequacy requirements, which aim at maintaining general stability by achieving two ingrained objectives. First, capital 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 foster prudent behavior by the banks. This requires analysis of the effect of pecuniary participation by shareholders on Pareto optimality, and analysis of potential doings by shareholders when facing pecuniary uncertainty. This paper combines modern banking scheme 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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