Abstract:
This study critically analyzes the regulatory and supervisory frameworks
that govern Islamic banks in the dual banking systems of Pakistan, Malaysia,
Bahrain, and the UK. We discuss their core regulatory functions and find that
conflicting views among Islamic jurists and policymakers have aggravated shariarelated
problems. Over the years, the regulatory framework in each country has
developed in a certain way. Malaysia and Bahrain have established indigenous
governance systems. Islamic banks in the UK still fall under the conventional
setup, while in Pakistan, they are governed by an orthodox regulatory framework
combined with an evolving Islamic banking regulatory system. However, the
effectiveness of the existing regulatory frameworks has never been fully tested by
the nascent Islamic banking industry, which remains very conservative.
