Islamic Banking and Finance in the European Union

Islamic Banking and Finance in the European Union

A Challenge

Studies in Islamic Finance, Accounting and Governance series

Edited by M. Fahim Khan and Mario Porzio

This timely book examines the authorization of Shari’ah-compliant intermediaries as either credit institutions or as investment companies in the European Union.

Chapter 9: Islamic Banking and the ‘Duty of Accommodation’

Gabriella Gimigliano

Subjects: economics and finance, financial economics and regulation, islamic economics and finance, money and banking

Extract

Gabriella Gimigliano The European Treaty does not lay down any provisions on the relationship between economic activities and religious freedom. On the contrary, it has been assumed that the First Amendment of the US Constitution contains a convincing argument for the duty of the accommodation of Islamic banking as domestic banks. However, the above conclusion is not confirmed when the matter is examined carefully. THE US DEBATE Although the authorization of an Islamic bank as a domestic bank (under either State or federal law) seems to be a long way off, since 2002 the Department of US Treasury has shown an increasing need to improve its understanding and awareness of Islamic financial products. The US government considers Islamic finance as part of advancing economic growth in the emerging markets and, at the same time, is trying to prevent terrorists from damaging lawful and legitimate institutions, such as conventional banks, Islamic banks and money transfer services bodies.1 Conventional and Islamic financing operations have a different structure but follow – according to John Taylor, Under Secretary of the US Treasury – the same economic principles, thereby both of them will benefit not only from transparency and rules of good governance, but also from an internationally-accepted regulatory framework (Taylor 2002, 2004). The trend toward the chartering of an Islamic bank as a domestic bank can be based on three matters (of facts and of law), according to Thomas Baxter, General Council and Executive Vice-President of the Federal Reserve Bank of New York: (a) the growing...

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