CoursePaidIslamic banking

Advanced Risk Management in Islamic Banking

Credit, market, liquidity, operational, Shari'ah and displaced commercial risk in light of AAOIFI standards

Advanced · 32 hours · 47 lessons · Language: English and Arabic · ID: IFS-COU-0058

USD 50Original price USD 99

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Risk is where Islamic banking is tested hardest. Contracts must be real, risk must be borne before profit is earned, and many conventional tools for shifting risk are not allowed. This course is a detailed, comprehensive treatment of how an Islamic bank identifies, measures, controls and reports its risks in light of the AAOIFI Shari'ah, accounting and governance standards.

It covers the risk governance framework; credit risk across murabahah, ijarah, salam and istisna'a; mitigation through pledges, guarantees and set-off, and the handling of default; expected credit losses under FAS 30; equity investment risk in musharakah and mudarabah; rate-of-return, commodity, inventory and currency risk; liquidity risk; displaced commercial risk, investment accounts and risk reserves; operational and legal risk; Shari'ah non-compliance risk; capital adequacy, stress testing and disclosure; and the risks of sukuk, takaful operators and Islamic windows.

The course has 12 modules with readings, case studies with worked calculations, slides, study notes and practice quizzes. It is the most demanding course on ifSPACE: the final exam has 100 questions drawn from a larger bank, mostly scenarios and calculations, in 150 minutes, with 80% to pass and one attempt.

This course is independent educational material written by ifSPACE in its own words. It does not reproduce AAOIFI texts, is not affiliated with AAOIFI and is not a fatwa.

What you will learn

Design a risk governance framework for an Islamic bank, including risk appetite, limits and the role of the Shari'ah supervisory board
Identify credit risk at each stage of murabahah, ijarah, salam and istisna'a and set Shari'ah-compliant controls
Apply pledges, guarantees, set-off and the rules on default, late payment and rescheduling without increasing the debt
Stage Islamic financing exposures and measure expected credit losses under FAS 30
Assess and monitor equity investment risk in musharakah and mudarabah within the limits on capital protection
Measure and manage rate-of-return, commodity, inventory and currency risk with Shari'ah-compliant tools
Build a liquidity risk framework with Shari'ah-compliant instruments, stress scenarios and a contingency funding plan
Explain displaced commercial risk and calculate the effect of profit equalisation and investment risk reserves
Control operational, legal and Shari'ah non-compliance risk, including purification of non-compliant income
Apply capital adequacy, stress testing and risk disclosure to the exposures of Islamic banks, sukuk, takaful and windows

Syllabus

1.Risk in Islamic banking and the risk governance framework
- Welcome to the courseFree preview1 min
- What makes risk different in an Islamic bank, and who governs itFree preview45 min
- Module 1 presentation15 min
- Module 1 practice quiz20 min
2.Credit risk in sale and lease contracts
- Credit risk at every stage of murabahah, ijarah, salam and istisna'a (SS 8, 9, 10, 11)45 min
- Case study: a credit committee file30 min
- Module 2 presentation15 min
- Module 2 practice quiz20 min
3.Credit risk mitigation, default and recovery
- Collateral, guarantees, set-off and the defaulting debtor (SS 3, 4, 5, 7, 39)45 min
- Case study: a deteriorating corporate client30 min
- Module 3 presentation15 min
- Module 3 practice quiz20 min
4.Measuring credit losses: impairment and provisioning
- Expected credit losses for Islamic financing (FAS 30, FAS 28, FAS 32)45 min
- Case study: staging and measuring a financing portfolio30 min
- Module 4 presentation15 min
- Module 4 practice quiz20 min
5.Equity investment risk in musharakah and mudarabah
- Partnership exposures, capital protection and monitoring (SS 12, 13, 45; FAS 33)45 min
- Case study: a mudarabah fund under strain30 min
- Module 5 presentation15 min
- Module 5 practice quiz20 min
6.Market risk: rate of return, commodity, inventory and currency risk
- Rate-of-return, benchmark, commodity and currency risk and their Shari'ah-compliant management (SS 1, 20, 45)45 min
- Module 6 presentation15 min
- Module 6 practice quiz20 min
7.Liquidity risk management
- Sources, tools and stress planning for liquidity in Islamic banks (SS 44, 20, 30, 17)45 min
- Case study: a liquidity squeeze30 min
- Module 7 presentation15 min
- Module 7 practice quiz20 min
8.Displaced commercial risk and investment account holders
- Investment accounts, profit distribution and risk reserves (FAS 27, FAS 35, SS 40, SS 46)45 min
- Case study: smoothing returns in a falling market30 min
- Module 8 presentation15 min
- Module 8 practice quiz20 min
9.Operational and legal risk in Islamic banks
- Process, people, systems, documentation and enforceability risks specific to Islamic banks45 min
- Case study: an operational incident review30 min
- Module 9 presentation15 min
- Module 9 practice quiz20 min
10.Shari'ah non-compliance risk
- Sources, consequences and governance of Shari'ah non-compliance risk45 min
- Case study: a Shari'ah non-compliance finding30 min
- Module 10 presentation15 min
- Module 10 practice quiz20 min
11.Capital adequacy, stress testing and risk reporting
- Capital for Islamic exposures, IFI-specific stress tests and risk disclosures (FAS 1)45 min
- Module 11 presentation15 min
- Module 11 practice quiz20 min
12.Risk in sukuk, takaful and Islamic windows: an integrated view
- Sukuk, takaful operators and windows (SS 17, SS 26, FAS 33, 34, 40)45 min
- Case study: an enterprise-wide risk review30 min
- Module 12 presentation15 min
- Module 12 practice quiz20 min
- Course summary and preparing for the final exam20 min