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Capital Regulatory Requirements for Islamic Banks in the UAE: A Comparative Analysis

  • Abdussalam Ismail OnagunEmail author
Chapter

Abstract

Islamic economics and finance is a practice that existed several decades ago but improved with time in terms of the products and services offered to the public. This proves that the Islamic banking has been growing globally. Unlike conventional banks, the participatory approach and risk-sharing are the basis of which Islamic financial system follows. Therefore, Islamic banks have in-depth relationship with their customers. In addition, Islamic banks face several challenges when complying with international rules and guidelines to the underlying risks that Islamic banks bear. There are several similar risks that both conventional and Islamic bank face, but there are also some other unique risks only Islamic banks are exposed to such as Shari’ah non-compliance risk. The main objective of this chapter is to study the regulation of capital adequacy requirements proposed by IFSB and compare it with Basel standards for commercial banks. The analysis suggests that financial authorities should direct all Islamic financial institutions particularly, Islamic banks in the UAE to implement IFSB standards and guidelines for capital adequacy requirements.

Keywords

Capital adequacy requirements Basel IFSB Islamic banks 

JEL Classification

G32 G34 

References

  1. Farag, M., Harland, D., & Nixon, D. (2013). Bank Capital and Liquidity. Bank of England Quarterly Bulletin, 53(3), 201–215.Google Scholar
  2. IFSB. (2005). IFSB-1: Capital Adequacy Standard for Institutions Offering Islamic Financial Services. Kuala Lumpur: Islamic Financial Service Board. Google Scholar
  3. ———. (2012). IFSB-12: Guiding Principles on Liquidity Risk Management for Institutions Offering Islamic Financial Services. Kuala Lumpur: Islamic Financial Service Board.Google Scholar
  4. ———. (2013). IFSB-15: Revised Capital Adequacy Standard for Institutions Offering Islamic Financial Services (IIFS). Kuala Lumpur: Islamic Financial Service Board.Google Scholar
  5. Stolz, S. M. (2007). Bank Capital and Risk-Taking: The Impact of Capital Regulation, Charter Value, and the Business Cycle. Heidelberg: Springer.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.International Centre of Islamic Economics, Dubai Airport FreezoneDubaiUnited Arab Emirates
  2. 2.Advisory Council of Experts, Noor TakafulAbujaNigeria

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