Risk Management in
Islamic Financial Instruments
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♦central bank is in the midst of developing a new regulatory frameworks for the financial industry
♦has an agreement with Bank of Tanzania for supervision of banks ♦ information on Islamic banking
or banking system was not reported.
Djibouti Central Bank of Djibouti is the primary regulator ♦dual banking system in operation ♦issued separate
law on the establishment of Islamic banking ♦has separate law for monitoring various banking risks
♦maintains the Basel standards for calculating minimum capital requirements
Egypt The economy is monitored by the Central Bank of Egypt ♦both on-site and off-site supervision systems
are present ♦separate Basel II implementation unit ♦long history of Islamic banking ♦dual banking
system ♦expect to see Islamic capital market activity soon.
Iraq Central Bank of Iraq maintain the regulatory atmosphere ♦dual banking system ♦long history of
banking but abrupt political condition has been the major challenge ♦from 2003-04, banks follow
international standards on minimum capital requirement.
Kazakhstan The National Bank of Kazakhstan is the Central Bank ♦ dual banking available with only one Islamic
bank ♦no separate Islamic banking act or law ♦follows Basel for risk supervision and prudential
guidelines ♦expects to see the country as the Islamic finance hub of Central Asia.
Lebanon Banque Du Liban or Bank of Lebanon is the Central Bank of Lebanon ♦freely floating exchange rate
♦banking secrecy act is active ♦established free banking zone ♦dual banking system ♦ separate law on
Islamic banking operation (from 2004) ♦implementing Basel II capital adequacy accord
Libya The Central Bank of Libya is the center of financial and monetary authority ♦dual banking is active but
expects to change it entirely to Islamic banking ♦recognizes the importance of Basel regulation but has
not yet implemented Basel II
Maldives Maldives Monetary Authority is the Central Bank of Maldives ♦dominated by foreign banks ♦dual
banking available with only one Islamic bank ♦Sukuk market is active ♦separate Islamic banking
regulation act of 2011 ♦implementing Basel II regulations
Morocco Bank Al-Maghrib is the Central Bank of Morocco ♦recognizes Basel II and currently implementing it
♦expects to see more from Islamic banking in future ♦presence of separate Islamic law was not found
Mozambique Bank of Mozambique is the Central Bank ♦July 2014 saw the introduction of a partnership between
Islamic and conventional banks ♦policies in place for dual banking ♦from January 2014; all banks must
implement Basel II.
Nigeria Central Bank of Nigeria recently announced extension of duration to implement the Pillar 1 of Basel II
♦dual banking system ♦no separate law for Islamic banking
Oman Central Bank of Oman established separate regulation for Islamic banking ♦adhered to Basel III capital
adequacy norms ♦dual banking system ♦Islamic window banking ♦Issuance of Sukuk in near future.
Palestine Palestine Monetary Authority controls the financial sector ♦dual banking ♦no window banking ♦no
specific Islamic banking law ♦Basel II is at the implementation stage ♦no Islamic capital market
activity present at this moment
Somalia Central Bank of Somalia is the Central Bank ♦No Islamic windows ♦no dual banking – only Islamic
banking ♦no separate Islamic banking law ♦yet to formulate standards in relation to Basel standards
♦Central Bank recently change the fee structure to a minimum that is required while chartering a bank
Saudi Arabia Saudi Arabian Monetary Association oversees the fiscal policies and regulates the financial sectors
♦dual banking system ♦Islamic banking regulation ♦Basel III implementation since 2013.
Sources: Compiled from Chapra and Khan (2000) Exhibit 1 and authors’ compilation from Central Bank websites and
National Islamic Finance Regulation.