EconPapers    
Economics at your fingertips  
 

Regulation of Islamic banks: Basel III capital framework and profit-sharing investment accounts

Kévin Spinassou () and Leo Indra Wardhana
Additional contact information
Kévin Spinassou: LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles
Leo Indra Wardhana: Universitas Gadjah Mada

Working Papers from HAL

Abstract: This paper theoretically examines the impact of capital requirements on Islamic banks. Given the large use of profit-sharing investment accounts (PSIA) in Islamic banking and the recent implementation of Basel III capital framework, we develop a simple model where banks are able to offer PSIA contracts under a regulation applying risk-weighted capital ratios and leverage ratio restrictions. We find that banks with high or low returns on assets prefer " conventional " banking, while banks with intermediate returns on assets operate as Islamic banks, by selecting PSIA instead of deposits. We further highlight that capital requirements tend to increase this incentive to opt for Islamic banking, especially when Islamic banks benefit from a less competitive environment and from a locally tailored capital regulation.

Keywords: profit-sharing investment accounts; bank capital regulation; Islamic finance; profit- sharing investment accounts; Basel III; banking capital requirements; IFSB (search for similar items in EconPapers)
Date: 2018-06-01
New Economics Papers: this item is included in nep-cba and nep-rmg
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01674376v3
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01674376v3/document (application/pdf)

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:hal:wpaper:hal-01674376

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2020-04-28
Handle: RePEc:hal:wpaper:hal-01674376