Towards a Plural Financial System
Studies in Islamic Finance, Accounting and Governance series
Edited by Valentino Cattelan
Chapter 10: Islamic banking in the European Union legal framework
This chapter deals with Islamic banking in the European Union (EU) legal framework. In particular, it attempts to ascertain whether Islamic banks can operate in the common market having regard to the European legal framework for credit institutions, investment firms, undertakings for collective investment in transferable securities (UCITS) and payment institutions. The study comprises four sections, plus final conclusions. The first section concerns the main advantages and disadvantages for financial operators (thus Islamic banks as well) deriving from the process of harmonization of financial services pursued by EU supranational regulation, while the three following sections draw a comparison between Islamic banks, on the one hand, and credit institutions, financial intermediaries and payment institutions, as regulated by EU law, on the other hand. The chapter will conclude with highlighting how the religious nature of Shari‘ah rules certainly challenges the enforcement of EU law on business conduct, as well as of EU contracting rules in the services provider-client relationship; notwithstanding, the teleological approach that animates EU law may reconcile Islamic banking with European financial regulation both in organizational and functional terms.
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