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Reading: The Regulation of Islamic Finance in the UK: A call for change

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The Regulation of Islamic Finance in the UK: A call for change

Author:

Khalifa H.K. Alkhalifa

LSEGB
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Abstract

For decades, the UK has been the leading nation in the Western world when it comes to Islamic finance. Despite this fact, the Islamic banking industry within the UK is still far behind conventional finance in terms of growth and development. This paper argues that a major obstacle in the path of this industry’s growth is the regulatory framework which it is currently subject to. As it stands, Islamic banking is regulated by the FCA and PRA in the same way as its conventional counterpart. This paper posits that Islamic banking should be subject to its own regulatory framework. Chapter 1 of this paper contextualises the debate by describing the operation of Islamic banking before going on to highlight how the risks involved in this kind of banking differ from those inherent in conventional banking. Chapter 2 builds on this analysis by examining the interplay between Islamic banking and two regulated aspects of banking: capital adequacy ratios (CARs) and guaranteed deposits. Chapter 3 concludes the discussion by pointing out a number of issues which could undermine the adoption of a more industry-specific approach by the UK regulator and offers starting points from which these issues could be resolved.
How to Cite: Alkhalifa, K.H.K., 2022. The Regulation of Islamic Finance in the UK: A call for change. LSE Law Review, 7(3), pp.272–300.
Published on 16 Mar 2022.
Peer Reviewed

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