Credit Risk Management in Islamic Banks: Integrating a new paradigm into Swiss banking regulation

Understanding credit risk in Islamic Banking will be key to facilitating the assimilation of Shariah- compliant institutions in Switzerland. Increasing demand from Muslim HNWIs and UHNWIs for alternatives to conventional private banking is likely to challenge regulators, as the current legal framework is not adapted to Islamic Banks. While most instruments used in Islamic Banking are different in form from standard financial contracts, these are already fully regulated. The main challenge however lies in applying capital adequacy requirements to Islamic Banks. This book explains how Swiss banking regulation will need to be adapted in order to allow Islamic Banks to follow Islamic economic precepts in their approach to Credit Risk Management.