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Islamic Banking (IB) has a different view on financial risk: The required minimum share holders equity must be lower than for counterparties in conventional banks because credit risk is also shouldered by unrestricted deposits owners, as the IB gives autorisation to use them in investments at its own discretion.


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Let's try to summarize your question before answering it: on the one hand concentration risk comes from the fact your book is highly correlated to few factors, hence you cannot take profit of diversification, market moves will affect you a lot; on the other hand wrong way risk is about being exposed to a counterparty such a way that the more you have ...



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