Islamic Finance: The New Regulatory Challenge, 2nd Edition

Foreword

Islamic finance has continued to be the fastest growing sector of the international financial system. This growth has also been in quality and depth, resulting from a high degree of innovation that has kept pace with the new demands for financial products and services as economies continue to evolve and transform. Of significance is the greater abundance of profit-sharing and loss-bearing savings and investment products and other instruments that use structured finance. Given these developments, Islamic finance has demonstrated its potential to provide effective financial intermediation to meet the needs of a modern globalised financial system and economy.

While Islamic finance has shown its resilience and sustainability during this recent global financial crisis, the significant and rapid evolution of Islamic finance highlights the need for greater focus and attention on issues of prudential regulation, risk management, and overall financial stability. The evolving compendium of standards, codes, and principles from the Basel Committee on Banking Supervision, the Financial Stability Board, and other international standard-setting bodies has brought greater clarity and understanding to issues on the regulation and supervision of banks and financial institutions, including Islamic financial institutions.

However, given the uniqueness of Shari’ah-compliant modes of fund mobilisation, funding, and financing, the different financial stability and regulatory challenges may ...