ABSTRACT
This chapter presents various viewpoints on bank capital and defines economic capital from an Islamic perspective by examining the relationship between economic capital and risks. Capital is one of the most essential economic principles (mu’amalat). Capital is the difference between the value of assets and liabilities. As such, it represents the available financial resources to withstand unforeseen losses. Due to the unique characteristics of the Islamic banking industry, the nature and size of the risks faced by such institutions may vary considerably. Islamic banks face additional risks as a result of owning assets that underpin some Islamic forms of operation and transactions.
