Basel III : relevance for Islamic banking

Abstract EN

The emergence of strong Islamic movements in last decades has generated a renewed interest in Islamic economics.

Hence, this study attempts to treat an important subject which is concerned with the adoption of Basel III in the Islamic banks.

this later was designed to improve and stabilize the financial system worldwide, especially in developing and emerging countries, the implementation of Basel III has involved a number of challenges and obstacles.

Accordingly, the main aim of this study is to investigate the main difficulties an obstacle that may face the Islamic banks in adopting Basel III standards.

The study concluded that the requirements provided by Basel III accord can be easily implemented by the Islamic banks which have special nature and work according to the sharia law, since Islamic banks don't rely on the third pillar of capital when meeting the requirements of capital adequacy, which is in support loans, and therefore there will be no impact to cancel the third pillar of capital on Islamic banks.

Second, the dependence of the capital adequacy standard on the first tier of capital by Islamic banks, which is high quality capital, enabling them to meet the requirements of the Basel III framework.

Finally, Islamic banks achieve good profit rates that enable them to form the necessary reserves for risk management