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Banking governance : what's special about Islamic banks ?

Author

Listed:
  • Faten Ben Bouheni

    (ISC Paris - Institut Supérieur du Commerce de Paris)

  • Chantal Ammi

    (LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - EESC-GEM Grenoble Ecole de Management - UEVE - Université d'Évry-Val-d'Essonne - TEM - Télécom Ecole de Management, IMT-BS - MMS - Département Management, Marketing et Stratégie - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris])

Abstract

Recent turmoil and financial institutions' failures in the U.S and in the EU have led to a renewed interest in corporate governance. Thus, the ultimate decisions taken to out of the crisis were to review the mechanisms of banking governance. The Islamic banking may use the same governance mechanisms as a conventional bank, in addition to the Shariah boards, the Shariah review unit, the Islamic International Rating Agency (IIRA) and, the Islamic financial Services Board (IFSB)like main bodies of monitoring the Islamic Banking industry. In contrast to the conventional banks, the Islamic banks are based on the active participation of public policy institutions, regulatory and supervisory authorities, and Shariah authorities. These institutions collectively monitor the performance of the firm and its faithfulness and commitment to explicit as well as implicit contracts. Islamic banking designates banking activities, which are conforming to Islamic law (Shariah) and guided by Islamic economics. In particular, Islamic law prohibits usury and payment of interest (Riba), it also prohibits investing in businesses that are considered unlawful. And the competitiveness of many of Islamic products and the PLS principle attract Muslim and non-Muslim investors.

Suggested Citation

  • Faten Ben Bouheni & Chantal Ammi, 2015. "Banking governance : what's special about Islamic banks ?," Grenoble Ecole de Management (Post-Print) hal-01263220, HAL.
    • Handle: RePEc:hal:gemptp:hal-01263220
    DOI: 10.19030/jabr.v31i4.9341
    as

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