Islamic Banking: Issues in Prudential Regulations and Supervision
IMF Working Papers, March 1, 1998
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- Islamic Banking: Issues in Prudential Regulations and Supervision
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Bibliographic details
- Authors: Luca Errico, Mitra Farahbaksh
- Published: March 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451980417.001
Overview and Scope
- Paper analyzes the implications of Islamic precepts on banks’ structure and activities, with a primary focus on banking supervision issues.
- Discusses issues in:
- A paradigm version of Islamic banking.
- Frameworks falling between the paradigm version and conventional banking.
- The case of Islamic banks operating in a conventional system.
Main Findings and Analytical Themes
- Structural and operational implications of Islamic precepts for banks’ balance sheets and liabilities.
- Prudential supervision challenges arising from Islamic contracts and financial instruments.
- Differences in regulatory treatment needed between:
- Paradigm Islamic banking models.
- Hybrid frameworks blending Islamic and conventional features.
- Islamic banks functioning within a conventional banking system.
- Emphasis on how Islamic banking affects:
- Bank liability composition (including demand deposit treatment).
- Equity capital and investment policy.
- The intermediation role of Islamic banks.
- Measurement and supervision of rate of return in Islamic contracts.
Policy and Supervisory Issues Highlighted
- Need to adapt banking supervision frameworks to account for Islamic banking specificities.
- Consideration of capital adequacy requirements and their applicability to Islamic bank structures.
- Prudential regulation adjustments where conventional regulatory assumptions do not align with Islamic financial principles.
- Supervision must address operational and transparency issues unique to Islamic banking practice.
Subjects and Keywords
- Subjects: Bank supervision; Banking; Capital adequacy requirements; Environment; Financial regulation and supervision; Financial services; Islamic banking; Islamic banking supervision
- Keywords: balance sheet; bank liability; Bank supervision; banking practice; Banking Supervision; Capital adequacy requirements; demand deposit; equity capital; Global; intermediation role; investment policy; Islamic bank; Islamic Banking; Islamic banking supervision; Prudential Regulations; rate of return; WP
Source: IMF Working Papers — "Islamic Banking: Issues in Prudential Regulations and Supervision" by Luca Errico and Mitra Farahbaksh, March 1, 1998.
Content in this bundle
- Islamic Banking: Issues in Prudential Regulations and Supervision - WP/98/30