Islamic Financial Architecture: Risk Management and Financial Stability

Financial architecture refers to a broad set of financial infrastructures that are needed for establishing and sustaining sound financial institutions and markets. These include an effective supervisory system, credible standards of best practices in risk management, internal control systems, disclosures and corporate governance. This set also includes the required macroeconomic preconditions of financial stability, sound domestic institutions, institutions that set international standards and organizations concerned with financial stability._x000D_ _x000D_ Islamic banking and finance has become systemically significant in several countries. As an alternative to traditional banking, Islamic banking has the inherent characteristics which can contribute to the efficiency and stability of the international banking and financial systems. Efficient risk management within individual banks, prudential regulation and effective supervision can be highly instrumental in enhancing the efficiency and stabilit