Basel III in the Islamic Finance Industry

Abstract

Islamic banks have demonstrated greater resilience than many other banking institutions in the 2008 financial crisis. However, the Islamic finance industry has reached such a dimension creating the need for developing appropriate strategies to adhere to international standards and to ensure a harmonious expansion within the global financial system. And with the adoption of the Basel III accord, the approved measures will certainly impact strategic decision making at banks around the world, especially Islamic banks. Nevertheless, even though the new accord applies equally across all banks, its impact would be felt differently depending on the nature, the region and the size of the bank. This article looks at the extent to which the new Basel III regulations will affect the activities of Islamic banks, and how they could positively or negatively influence the way Islamic banking institutions fund their activities and implement their processes and practices.

TOPICS: ESG investing, global, legal/regulatory/public policy