Regulation and Supervision of Islamic Banks
IMF Working Papers, December 12, 2014
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- Regulation and Supervision of Islamic Banks
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Bibliographic details
- Authors: Aledjandro Lopez Mejia, Suliman Aljabrin, Rachid Awad, Mohamed Norat, In W Song
- Published: December 12, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498361590.001
Summary
- This paper aims at developing a better understanding of Islamic banking (IB) and providing policy recommendations to enhance the supervision of Islamic banks (IBs).
- It points out and discusses similarities and differences of IBs with conventional banks (CBs) and reviews whether the IBs are more stable than CBs.
- Given the risks faced by IBs, the paper concludes that they need a legal, corporate and regulatory framework as much as CB does.
- The paper argues that it is important to ensure operational independence of the supervisory agency, which has to be supported by adequate resources, a sound legal framework, a well designed governance structure, and robust accountability practices.
Key findings and analysis
- Compares Islamic banks (IBs) with conventional banks (CBs) in terms of structure, risks, and stability.
- Reviews the question of whether IBs are more stable than CBs.
- Identifies risks specific to IBs that necessitate comparable legal, corporate, and regulatory frameworks to those for CBs.
- Emphasizes the governance and resource needs of supervisory agencies overseeing IBs.
Policy recommendations
- Ensure operational independence of the supervisory agency.
- Support supervisory independence with:
- adequate resources,
- a sound legal framework,
- a well designed governance structure,
- robust accountability practices.
Subject areas and keywords
- Subject: Banking, Basel Core Principles, Credit risk, Deposit insurance, Financial regulation and supervision, Financial services, Islamic banking, Legal support in revenue administration, Revenue administration
- Keywords: bank, banking supervision, Basel Core Principles, conventional banks, Credit risk, Global, governance structure, IB balance sheets, IB framework, IB presence, IB sector, IBS arise, IBS disclosure, IBS financing, IBS intermediation, IBS risk sharing, IBS shift, Islamic bank, Islamic banking, Islamic banks, Legal support in revenue administration, regulation of Islamic banks, regulatory framework, risk sharing, transparency risk, WP