A Capital Adequacy

A Capital enough Framework for Moslem Banks: The do to oblige Depositors Risk abuse With Managers Risk Taking By Dadang Muljawan research Economist, Bank Indonesia Humayon A. Dar Lecturer, Department of Economics, Loughborough University, Loughborough, UK Maximilian J.B. Hall Professor, Department of Economics, Loughborough University, Loughborough, UK correspondent motive: Maximilian J. B. Hall Department of Economics, Loughborough University Loughborough LE11 3RG, United Kingdom knell: +44 (1509) 222714 Fax : +44 (1509) 223910 E-mail : M.J.Hall1@lboro.ac.uk 1 A Capital Adequacy Framework for Islamic Banks: The Need to Reconcile Depositors Risk Aversion With Managers Risk Taking Abstract Conceptually, an Islamic bank has an equity-based capital structure, dominated by shargonholders equity and investiture deposits based on profit and leaving sharing [PLS]. thither is no need for capital sufficiency regulations if the Islamic banks are structured as pure PLS-based organizations. However, due(p) to informational asymmetry and risk nuisance by investors, there shortly exist fixed affirm liabilities on the Islamic banking ratio sheets.

This necessitates the imposition of capital sufficiency requirements, which aim at maintaining general stability by achieving ii fundamental 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 rightfulness incentives to shareholders to promote prudent behavior by the banks. This requires analysis of the government i ssue of financial participation by sharehold! ers on Pareto optimumity, and analysis of effectiveness behaviour by shareholders when facing financial uncertainty. This paper combines newfangled banking theory and principal-agent analysis to break a framework for an optimal capital structure for Islamic banks. The proposed capital regulation...If you want to vanquish a full essay, fiat it on our website: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay