The Required Adjustments of the Role of the Central Banks' Supervision to Deal with Islamic Banks

Mohamed Ahmad Sakr, Buthaina M. A. Muhtaseb


The aim of this research is to highlight the fundamental issues in Islamic banking supervision. In view of the role played by the central bank in the control, regulation and supervision of financial institutions in the economy, and the emergence of Islamic banking in various Muslim countries and their recent expansion worldwide, the issue of what role the central bank should play in the affairs of Islamic banks has been recently raised. Investigation of the applicability of conventional instruments of the central bank on Islamic banks shows that some controls do not fit with the nature of these banks and their specialty should be considered. Accordingly, the study suggests adaptation of some instruments such as open market operation and the discount rate policy to Islam. The problem of liquidity as a last resort should be solved. Central Banks should follow the guiding principles for risk management, and capital adequacy standards, in addition to other principles issued by the Islamic Financial Services Board (IFSB) in order to be integrated in the global financial and banking industry.


Islamic Banking, Central Banks' Supervision, Adjustment of Supervision Standards, Islamic Teachings, Global Financial and Economic Crisis.

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