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Andreas Jobst and Mr. Juan Sole
This paper provides a conceptual overview of key aspects of the design and implementation of solvency stress testing of Islamic banks. Based on existing regulatory standards and prudential practice, the paper explains how Islamic finance principles and their impact on various risk drivers affect the capital assessment of asset-oriented financial intermediation under stress. The formal specification of these risk factors helps operationalize and integrate the stress testing of Islamic banks within established frameworks for financial stability analysis.
Andreas Jobst and Mr. Juan Sole

) , ( 23 ) which ignores the loss absorption by IAs, so that R W A ˜ U I A + R W A ˜ R I A R W A ˜ t o t a l → 0 , and overstates the effective capital impact of credit risk-related losses. 79 Special sales (with delayed settlement) may involve additional credit risk. The counterparty risk of a bank increases if the asset price of a commodity (“collateral asset”) supporting a sales contract with deferred delivery ( salam or istisna’a ) increases until the maturity date of the contract; this applies conversely to asset price declines if the