Basel III liquidity requirement ratios and Islamic banking

Habib Ahmed
Authors registered in the RePEc Author Service: Ahmed Mohamed Habib () and Habib Ahmed ()

Journal of Banking Regulation, 2015, vol. 16, issue 4, 264 pages

Abstract: Basel III was initiated after the recent global financial crisis to strengthen the regulatory regime for the banking sector. As liquidity problems faced by banks were a key feature of the crisis, Basel III has added liquidity requirement ratios in addition to reinforcing the capital requirements. Specifically, the Liquidity Coverage Ratio (LCR) has been introduced to ensure liquidity in banks in the short term, and a Net Stable Funding Ratio (NSFR) is proposed to promote medium- and long-term resilience against liquidity shocks. Islamic banking has been growing rapidly in different parts of the world and forms a significant part of the financial sector in many countries. This article examines the implications of the new Basel III liquidity requirement ratios for Islamic banks. Given the short history of its development and the restrictions imposed by Shari’ah principles, the Islamic banking sector faces several restrictions that will constrain its adoption of the Basel III liquidity requirements. After presenting the basic principles of Islamic finance, the article identifies the challenges that Islamic banks will face in meeting their liquidity needs and outlines certain practices in which these are being resolved.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.palgrave-journals.com/jbr/journal/v16/n4/pdf/jbr201420a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/jbr/journal/v16/n4/full/jbr201420a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jbkreg:v:16:y:2015:i:4:p:251-264

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41261/PS2

Access Statistics for this article

Journal of Banking Regulation is currently edited by Dalvinder Singh

More articles in Journal of Banking Regulation from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().