Camille Paldi

(Franco-American Alliance for Islamic Finance (FAAIF), Dubai, UAE)

 

 

Abstract: Do Islamic Banks require more regulatory capital than conventional banks in order to operate Islamic modes of finance? Due to the reality of having to compete in a conventional system and Shari’ah prohibitions on many of the risk mitigation techniques found in conventional banking, Islamic banks may be at a disadvantage compared to conventional banks. This paper examines the risks involved with each mode of Islamic finance and makes an analysis of the capital adequacy requirements and liquidity function of Islamic and conventional banks. True Islamic banking may be too expensive at this moment in time.

 

 

Key words: Islamic finance; capital adequacy; Islamic banking risks

 

JEL code: F300