Resolution Frameworks for Islamic Banks

IMF Working Papers, November 24, 2015

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Resolution Frameworks for Islamic Banks

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Bibliographic details

• Authors: Elsie Addo Awadzi, Carine Chartouni, Mario Tamez
• Published: November 24, 2015
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781513503219.001

Authors and Publication

• By Elsie Addo Awadzi, Carine Chartouni, Mario Tamez
• November 24, 2015
• IMF Working Papers, Working Paper No. 2015/247
• Pages: 34
• Volume: 2015
• Issue: 247
• DOI: https://doi.org/10.5089/9781513503219.001
• Stock No: WPIEA2015247
• ISBN: 9781513503219
• ISSN: 1018-5941

Executive summary and scope

• Islamic banking is growing rapidly and its potential impact on global financial stability cannot be underestimated.
• International standards for resolving banks have evolved after the global financial crisis, culminating in the Financial Stability Board’s (“FSB”) Key Attributes of Effective Resolution Regimes for Financial Institutions.
• This paper examines the applicability of the Key Attributes to the resolution of Islamic banks.
• It concludes that a number of issues would need to be addressed, owing to Islamic banks’ unique governance structures and balance sheets.
• It recommends international guidance for the design of robust Shari`ah-compliant resolution frameworks for jurisdictions with Islamic banks.

Key findings

• Applicability of FSB Key Attributes to Islamic banks requires careful assessment because of:
  • unique governance structures of Islamic banks;
  • distinctive balance sheets of Islamic banks.
• The paper identifies gaps between existing international resolution standards and the needs of Shari`ah-compliant resolution frameworks.
• Emphasis on the systemic relevance of Islamic banking given its rapid growth and potential global financial stability impact.

Policy recommendations

• Develop international guidance for the design of robust Shari`ah-compliant resolution frameworks for jurisdictions with Islamic banks.
• Address legal, governance, and balance-sheet specificities of Islamic banks within resolution regimes to ensure consistency with the FSB Key Attributes.
• Consider adaptations to resolution tools and powers to reflect the particular contractual and asset structures used by Islamic banks.

Subjects and keywords (as listed)

• Subject: Asset and liability management, Bank resolution, Bank resolution framework, Banking, Financial crises, Financial services, Islamic banking, Legal support in revenue administration, Revenue administration, Special purpose vehicle
• Keywords: account holder, asset portfolio, balance sheet, bank management, bank resolution, Bank resolution framework, Global, Islamic bank, Islamic bank resolution, Islamic banking, Islamic banks, Legal support in revenue administration, originating bank, resolution authority, resolution framework, RRPs help resolution authorities, Special purpose vehicle, WP

Disclaimer

• This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Source: Resolution Frameworks for Islamic Banks, IMF Working Papers (2015/247).

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