Title: Market orientation, balance sheets and risk profile of Islamic banks

Authors: Shahid Anjum

Addresses: College of Management, Lawrence Technology University (LTU), Buell Bldg., 21000 West Ten Mile Road, Southfield, MI 48075-1058, USA

Abstract: Banks can perform various functions and balance-sheet structure lies at the heart of the asset-liability management process in banks. Composition of a bank's balance-sheet assets and liabilities is one of the key factors that determine the level of risk faced by the banking institution. Islamic banks face various risks based on the market orientation of a bank which determines its balance sheet structure and the type of products that a bank offers. These risks can be credit, market and liquidity risks and operational risks. Each Shariah financial product carries these risks in varying proportions. This article discusses the risk composition of the product portfolio of a bank that can give the aggregative risk profile by simple aggregation, ignoring correlations, of particular hypothetical category of the Islamic banks.

Keywords: balance sheet portfolio; Islamic banks; Islamic finance; Shariah financial products; asset liability risks; credit risk; operational risk; market risk; liquidity risk; enterprise risk management; ERM; Islamic banking industry; market orientation; balance sheets; risk profile.

DOI: 10.1504/IJEPEE.2015.073505

International Journal of Economic Policy in Emerging Economies, 2015 Vol.8 No.4, pp.318 - 331

Available online: 10 Dec 2015 *

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