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Islamic finance and conventional financial systems. Market trends, supervisory perspectives and implications for central banking activity

Giorgio Gomel (), Angelo Cicogna (), Domenico De Falco (), Marco Valerio Della Penna (), Lorenzo Di Bona De Sarzana (), Angela Di Maria, Patrizia Di Natale (), Alessandra Freni (), Sergio Masciantonio (), Giacomo Oddo () and Emilio Vadal� ()
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Giorgio Gomel: Banca d'Italia
Angelo Cicogna: Banca d'Italia
Domenico De Falco: Banca d'Italia
Marco Valerio Della Penna: Banca d'Italia
Lorenzo Di Bona De Sarzana: Banca d'Italia
Patrizia Di Natale: Banca d'Italia
Alessandra Freni: Banca d'Italia
Emilio Vadal�: Banca d'Italia

Authors registered in the RePEc Author Service: emilio vadala', Sr.

No 73, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The paper analyses Islamic finance from the central bank and supervisory authority�s perspective, focusing on the European and Italian context. It depicts a rapidly expanding sector, with recent annual growth rates of between 10 and 15 percent and a geographical presence that now reaches several Western countries. Future prospects, however, could be hampered by problems concerning the standardization of products, governance structure, supervisory regulation, monetary policy instruments, and liquidity management. Islamic intermediaries are not necessarily riskier than traditional counterparts but their operational structure tends to be more complex. Key issues in supervision include the treatment of investment accounts and transparency. It has been seen that there are limits to the efficiency of the monetary policy instruments developed so far to remedy the prohibition of interest; moreover, the growth of interbank and money markets is hindered by a shortage of "Shari'ah-compliant" products. Problems arising from the participation of Islamic banks in payment systems are also discussed.

Keywords: Islamic finance; Islamic financial institutions; supervision; monetary policy instrments; payment systems (search for similar items in EconPapers)
JEL-codes: G20 F39 Z12 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-ara, nep-cba, nep-cwa, nep-eec and nep-mon
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