Islamic Banking and Finance in the European Union: A Challenge (Studies in Islamic Finance, Accounting and Governance)

253 Pages·2010·2.29 MB·English

by  M. Fahim Khan

Islamic Banking and Finance in the
European Union
STUDIES IN ISLAMIC FINANCE, ACCOUNTING AND
GOVERNANCE
Series Editor: Mervyn K. Lewis, Professor of Banking and Finance, South Australia
and Fellow, Academy of the Social Sciences, Australia
There is a considerable and growing interest both in Muslim countries and in the
West surrounding Islamic fi nance and the Islamic position on accounting and gov-
ernance. This important new series is designed to enhance understanding of these
disciplines and shape the development of thinking about the theory and practice of
Islamic fi nance, accounting and governance.
Edited by one of the leading writers in the fi eld, the series aims to bring together
both Muslim and non-Muslim authors and to present a distinctive East–West per-
spective on these topics. Rigorous and authoritative, it will provide a focal point
for new studies that seek to analyse, interpret and resolve issues in fi nance, account-
ing and governance with reference to the methodology of Islam.
Islamic Banking and
Finance in the
European Union
A Challenge
Edited by
M. Fahim Khan
Chairman, Riphah Centre of Islamic Business, Riphah
International University, Islamabad, Pakistan
Mario Porzio
Professor of Banking Law, University of Naples ‘Federico II’,
Italy
STUDIES IN ISLAMIC FINANCE, ACCOUNTING AND
GOVERNANCE
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
© M. Fahim Khan and Mario Porzio 2010
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means, electronic,
mechanical or photocopying, recording, or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
Edward Elgar Publishing, Inc.
William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library of Congress Control Number: 2009938427
ISBN 978 1 84980 017 4
Printed and bound by MPG Books Group, UK
2
0
Contents
List of contributors vii
Preface viii
Acknowledgements x
Introduction 1
M. Fahim Khan and Mario Porzio
PART I HISTORICAL BACKGROUND
1 From the poor to the merchant 11
Umberto Santarelli
PART II ISLAMIC BANKING BUSINESS
2 The provision and management of savings: the client–
partner model 23
Gian Maria Piccinelli
3 Islamic fi nance: personal and enterprise banking 40
Frank E. Vogel
4 Islamic banking in Europe: the regulatory challenge 61
M. Fahim Khan
5 Islamic fi nance and ethical investments: some points of
reconsideration 76
Valentino Cattelan
PART III THE CHALLENGE
6 Islamic banking versus conventional banking 91
Claudio Porzio
7 Islamic banking: a challenge for the Basel Capital Accord 112
Elisabetta Montanaro
8 Investing with values: ethical investment versus Islamic
investment 128
Celia de Anca
v
vi Islamic banking and fi nance in the European Union
9 Islamic banking and the ‘duty of accommodation’ 148
Gabriella Gimigliano
10 The remuneration of sight accounts and the feasible
competition between Islamic and Western systems 158
Gennaro Rotondo
PART IV RESPONSE FROM THE EUROPEAN
COUNTRIES: ENGLISH, FRENCH, GERMAN
AND ITALIAN EXPERIENCES
11 The French licensing authority faced with the globalisation
of Islamic fi nance: a fl exible position 167
Christophe Arnaud
12 German banking supervision and its relationship to Islamic
banks 174
Johannes Engels
13 Islamic banking and prudential supervision in Italy 189
Luigi Donato and Maria Alessandra Freni
14 Islamic banking: impression of an Italian jurist 207
Pietro Abbadessa
15 Islamic banking in the United Kingdom 212
Rodney Wilson
16 The riba prohibition and payment institutions 222
Vittorio Santoro
Glossary 227
Index 229
Contributors
Pietro Abbadessa, ‘Cattolica del Sacro Cuore’ University of Milano,
Italy.
Christophe Arnaud, Comité des établissements de crédit et des entreprises
d’investissement, (CECEI), Banque de France.
Valentino Cattelan, University of Siena, Italy.
Celia de Anca, Center for Diversity in Global Management IE Business
School, Spain.
Luigi Donato, Bank of Italy.
Johannes Engels, BaFin, Germany.
Maria Alessandra Freni, Bank of Italy.
Gabriella Gimigliano, University of Siena, Italy.
M. Fahim Khan, Riphah Centre of Islamic Business, Riphah International
University, Islamabad, Pakistan.
Elisabetta Montanaro, University of Siena, Italy.
Gian Maria Piccinelli, Second University of Napoli, Italy.
Claudio Porzio, Parthenope University of Napoli, Italy.
Mario Porzio, University of Naples ‘Federico II’, Italy.
Gennaro Rotondo, Second University of Napoli, Italy.
Umberto Santarelli, University of Pisa, Italy.
Vittorio Santoro, University of Siena, Italy.
Frank E. Vogel, Harvard Law School, USA.
Rodney Wilson, University of Durham, UK.
vii
Preface
This book is a multidisciplinary volume, comprising of four parts. After
a short introduction by the editors, outlining the theme of the book,
Santarelli, a skilful scholar of legal history, deals with the common origin
of Islamic and Western traditions in commercial and banking transactions,
in a period in which Italian merchants and their organizations had been at
the forefront of the post- medieval renaissance in trade and law (Part I).
In Part II Gian Maria Piccinelli, Frank Vogel, Muhammad Fahim
Khan and the young Valentino Cattelan present the main features of
Islamic banking. They raise several doubts and diff erent questions on the
future development of Islamic banking in European Union. What will the
next challenges be? Will the European banking framework be a suitable
context for the development of Islamic fi nancial intermediaries? Some
questions have been answered in Part III and some others in Part IV.
Part III deals with the challenges of the authorisation of Islamic
banking in the European context. The fi rst two chapters adhere to an eco-
nomic approach (Claudio Porzio and Elisabetta Montanaro) and consider
the profi t- and loss-s haring mechanism but in diff erent ways. The authors
give a detailed analysis of Islamic banking activities, paying attention to
either the profi t- sharing approach and the main objectives of prudential
regulation based on minimum capital requirements (Montanaro), or the
profi t- and loss- sharing mechanism and the current evolution of fi nancial
intermediary theory and supervision regulation (Porzio).
In the same Part, when De Anca makes a comparison between respon-
sible investment and Islamic investment, she thinks that ‘Although their
history, subject matter, sources of funds, or management might diff er,
the responsible investment movement and the Islamic investment move-
ment are both responses to a desire by investors to live their fi nancial lives
according to their own values’. The desire that De Anca refers to is further
developed by Gimigliano, who considers whether the religious/ethical
roots of Islamic banking operations might evoke diff erent approaches
from EU and US regulators. Rotondo also considers the religious/ethical
root of Islamic banking as a competitive advantage in comparison with
Western banks.
Part IV contains responses from four European countries (the United
Kingdom, France, Germany and Italy) because the European framework
viii
Preface ix
has not widely enforced a full harmonization of banking and fi nancial
rules. Most of the chapters deal with the European Banking Code, accord-
ing to Directive 2006/48 EC, but Part IV also follows the most recent
development in European law, namely the up-t o-d ate payment institu-
tions (Directive 2007/64 EC).
We have invited scholars and offi cers from national authorities to con-
tribute to this volume. The reader will forgive us for giving slightly more
emphasis to the Italian results: this represents an acknowledgement of the
great interest constantly showed by the Italian academic community since
the beginning of this experience.
Muhammad Fahim Khan and Mario Porzio