Are Islamic Banking Roles Suitable For And Adaptable To Global Financial Regulations - Research Paper Example

The increasing importance and interaction of Islamic banks with their Western counterparts means that common ground of understanding with regard to inter-bank cooperation and relationships need increased understanding and regulatory enhancement. The key issue impacting banking operations is a risk. This is the factor that bankers seek to minimize as well as control, and under inter-bank cooperation, the need for setting adequate capital reserves against loss is the key issue. The different structures used by Islamic banks in conjunction with Sharia compliance represents the point in question and this the question as posed by this study, which seeks to understand as well as determine the suitability as well as adaptability of Islamic Banking roles to global financial regulations.

In exploring the topic, it was deemed that the legal systems are the foundation points, along with understanding the structures and rationales behind Sharia financing. Working around terminology is then a means to fit or devise methods to cause the preceding to occur. This study found that there is a common ground for the above, as well as the fact that present global banking regulations contain processes whereby this can work. The question is not solely if Islamic banking can adapt or if they are suitable to global banking regulations, but rather if the two systems can find a common ground under which to work.

This examination has found that such is the case, but not without effort on both parts to craft risk management procedures and oversight to deal with the special circumstances used in Sharia-compliant banking. In approaching as well as delving into the subject of ‘Are Islamic Banking Roles Suitable For and Adaptable To Global Financial this study entails understanding the differences of that system from the Western system of banking. The number of Islamic countries along with their respective overall populations represents a segment of global economics that has and is increasingly become more important.

There are 48 countries where Muslims are the majority (Islamic World, 2010) with the total global Muslim population estimated in 2009 as 1.66 billion (islamicpopulation.com, 2009) out of a world population of 6,805,152,504 (U.S. Census Bureau, 2010) that represents 24.38%. In spite of the preceding, Islamic banking totals just 0.5% of international banking assets (Watts, 2009). Despite that small percentage, the oil-rich economies of Kuwait, Saudi Arabia, Indonesia, Malaysia as well as other countries in the Middle East have embarked on massive infrastructure and building programs that have tied a number of their loans and finances into the international system (Watts, 2009).

Evidence of the increased presence of Islamic banking is strongest in the United Kingdom that has become the Western Islamic banking center (Wood, 2007). The preceding marks the spearhead of an Islamic banking surge that has spread to the United States, along with other prominent Western financial centers due to the involvement of “… banks such as Citigroup, HSBC, Deutsche Bank, Morgan Stanley, and Goldman Sachs” (Wood, 2007). This summary has been engaged in to provide a realm of understanding with regard to the economic potentials behind the interest in Islamic banking.

In keeping with the above is the fact that as countries with the largest percentage of Islamic populations continue to achieve increased economic results, the impact and significance of the development in those economies as well as global trade takes on enhanced importance with regard to financial ramifications and inter-bank action. In examining the context of this study the core aspect in the examination concerns itself with the suitability as well as adaptability of Islamic banking roles to global financial regulations.

In order to ascertain the answer to this broad-reaching question, a number of areas for investigation will need to be engaged.