## Islamic Banking: Issues in Prudential Regulations and Supervision

_IMF Working Papers, March 1, 1998_

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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

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### 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.*

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## Content in this bundle

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/islamic-banking-issues-in-prudential-regulations-and-supervision-2524_