Continuation
Similar accounting/risk management practices may be necessary
for other products offered by Islamic banks.
Evolution of products in this area conform with the existing frameworks
used for conventional finance.
But, these modes of finance may naturally give rise to
unique, albeit relatively inconsequential risks.
Actually, Islamic finance has asset-based nature.
It means that Islamic banks will always be exposed to a
certain inflationary pressure when trading in real assets.
Nevertheless, Islamic banks have incorporated ways of
managing inflation risk by using parallel contracts executed in sequence.
It mitigates fluctuations in asset
prices.
Also, provides fixed
cash flows from assets in a similar fashion to conventional loan agreements.
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)
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