Risk management in Malaysian Islamic banks

Abstract

Risk management in banking in the last decade has received world wide attention due to unethical banking practices and rapid changes in the microeconomic and fmancial factors in the global market. In contrast to conventional banks, Islamic banks face greater difficulties in recognizing and handling risks. This is due to greater complexities arising from the nature of specific risks and the profit-loss sharing concept of Islamic financing. This paper aims to document how risk management is carried out among Malaysian Islamic banks. We also include comparison of risks among these banks. However, central to this paper is the highlight of risks related to the different modes of fmancing and salient risk management operational issues faced by Islamic banks.