Islamic finance in Europe (114)

Continuation

The risk management techniques used by conventional banks can be used to mitigate this risk.

For example:

-      by using good-quality data on the past performance of the counterparty to gauge this risk;

-      and by determining the probability of default.

As security against credit risk:

-      collateral;

-      and pledges

can be used as well as:

-      personal;

-      and institutional

guarantees.

From the research paper of European Central Bank

(Authors: F.Mauro, P.Caristi, S.Couderc, A.D.Maria, L.Ho, B.K.Grewal, S.Masciantonio, S. Ongena and S.Zaher)