Search Results

You are looking at 1 - 2 of 2 items for :

  • "IBS shift" x
Clear All
Aledjandro Lopez Mejia, Suliman Aljabrin, Rachid Awad, Mr. Mohamed Norat, and Mr. In W Song
This paper aims at developing a better understanding of Islamic banking (IB) and providing policy recommendations to enhance the supervision of Islamic banks (IBs). It points out and discusses similarities and differences of IBs with conventional banks (CBs) and reviews whether the IBs are more stable than CBs. Given the risks faced by IBs, the paper concludes that they need a legal, corporate and regulatory framework as much as CB does. The paper also argues that it is important to ensure operational independence of the supervisory agency, which has to be supported by adequate resources, a sound legal framework, a well designed governance structure, and robust accountability practices.
Aledjandro Lopez Mejia, Suliman Aljabrin, Rachid Awad, Mr. Mohamed Norat, and Mr. In W Song

more Stable than Conventional banks? While in theory IBs are less susceptible to instability than conventional banks, in practice they are just as exposed to risks as CBs. In theory, the comparative advantage of IBs is its risk sharing feature (i.e., banks participate in the risks of their counterparties and investment depositors share the risk of the banking business). In practice, this advantage is neutralized as IBs end up paying to investment accounts holders competitive “market” returns regardless of their performance. Moreover, IBs shift away from profit