Islamic finance in Europe (125)

Continuation

3.2      INTEREST RATE AND INFLATION RISKS

The portfolios of conventional financial institutions consist mainly of:

-      loans

-      advances

-      financial leases

and other similar credit/term facilities.

Exposure to real economic sectors, such as real estate, is not direct.

It follows from impairments on bad loans.

It provides that these:

-      have not been securitised

-      and sold on to investors.

Such portfolios are also managed with due consideration of the future impact of interest rate changes on:

-      operating efficiency

-      and institutional profitability.

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)