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The Nature of Islamic Banking and Solvency Stress Testing - Conceptual Considerations

Author

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  • Andreas Jobst
  • Mr. Juan Sole

Abstract

This paper provides a conceptual overview of key aspects of the design and implementation of solvency stress testing of Islamic banks. Based on existing regulatory standards and prudential practice, the paper explains how Islamic finance principles and their impact on various risk drivers affect the capital assessment of asset-oriented financial intermediation under stress. The formal specification of these risk factors helps operationalize and integrate the stress testing of Islamic banks within established frameworks for financial stability analysis.

Suggested Citation

  • Andreas Jobst & Mr. Juan Sole, 2020. "The Nature of Islamic Banking and Solvency Stress Testing - Conceptual Considerations," IMF Working Papers 2020/156, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2020/156
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=49597
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    Cited by:

    1. Walid Mansour & Hechem Ajmi & Karima Saci, 2022. "Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(3), pages 265-287, September.
    2. Dibooglu, Sel & Cevik, Emrah I. & Tamimi, Hussein A. Hassan Al, 2022. "Credit default risk in Islamic and conventional banks: Evidence from a GARCH option pricing model," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 396-411.

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