A Capital Adequacy

A Capital enough Framework for Moslem Banks: The conduct to settle 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 synonymic motive: Maximilian J. B. Hall Department of Economics, Loughborough University Loughborough LE11 3RG, United Kingdom recall: +44 (1509) 222714 Fax : +44 (1509) 223910 E-mail : M.J.Hall1@lboro.ac.uk 1 A Capital Adequacy Framework for Moslem Banks: The Need to Reconcile Depositors Risk Aversion With Managers Risk Taking Abstract Conceptually, an Islamic bank has an beauteousness-based capital structure, dominated by sh beholders equity and investment 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 detestation by investors, there shortly exist fixed birdsong liabilities on the Islamic banking ratio sheets.

This necessitates the imposition of capital enough requirements, which aim at maintaining general stability by achieving deuce 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 remunerate incentives to shareholders to promote prudent behavior by the banks. This requires analysis of the r! ear of financial participation by shareholders on Pareto optimumity, and analysis of latent behaviour by shareholders when facing financial uncertainty. This paper combines recent 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 write down a full essay, fiat it on our website: BestEssayCheap.com

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