Islamic Banking

Issues in Prudential Regulations and Supervision

This paper analyzes the implications of Islamic precepts on banks’ structure and activities, focusing on banking supervision issues. It points out and discusses these issues in the context of a paradigm version of Islamic banking, as well as in frameworks that fall between the paradigm version and conventional banking. The case of Islamic banks operating in a conventional system is also examined.

Contrary to conventional banks, Islamic banks cannot obtain funds through LOLR
facilities, including Lombard and discount windows, as well as overdraft or other
credit facilities operated by the central bank. This is due to the fact that all of the ...