Islamic Economics

Islamic Economics

Theoretical Evaluating of risk taking in the Riba free banking and the role of capital adequacy in its risk management

Document Type : Original Article

Authors
Abolghasem Tohidinia 1
Hamid Abrishami 2
Hamid Nasiri 3
1 faculty member of university if Tehran
2 Faculty member of university of Tehran
3 master of economics, university of Tehran
Abstract
One of the most important issues in the banking system, which can disrupt the functioning of this system, is risk discourse. Since the volume of credible capital resources reduces bank bankruptcy risk, one of the important indicators for assessing the performance and health of banks is the ratio of capital adequacy.
In this research, after reviewing the theoretical foundations of capital adequacy ratio in conventional banking and explaining the nature of riba free banking (parallel contract model) and the principles governing it, in the first step, by analytical-descriptive method, we have explained the risks of such banking. We examine the role of capital adequacy ratio in its risk management. In the next step, the theoretical findings of the survey are evaluated and validated by experts. The result of the research suggests that the riskiness of a non-risky banking system is typically lower than that of conventional banking, which implies a reduction in the importance of capital adequacy ratio for risk management in such banking compared to conventional banking.
Keywords
Riba free Banking
Banking Risks
Capital Adequacy Ratio
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