Studies in Islamic Finance, Accounting and Governance series
Edited by M. Fahim Khan and Mario Porzio
Chapter 10: The Remuneration of Sight Accounts and the Feasible Competition between Islamic and Western Systems
Gennaro Rotondo This chapter will attempt to outline the methods of interaction and integration between the Islamic and the European banking models from the standpoint of banking rates on sight accounts by looking into two issues: (1) the rationale of the EC Court of Justice’s judgment, of October 5 2004, C-244/04 (Rotondo 2006), about French law on sight account remuneration; and (2) a common practice in European systems not to remunerate it, as in the Italian experience. Also, the structure of current accounts in the Islamic framework is not so far from the current account model in Western banking regulations, but the former bears neither charges nor interest. Current accounts (al-hisab al-jari) and saving accounts are (hisab al-tawfir) sight accounts. In Islamic current accounts, customers can withdraw money and write cheques within the limits either of the balance or of the funds granted, but customers may not have access to international credit card networks. THE REMUNERATION OF SIGHT ACCOUNTS: A ‘LIKELY’ COEXISTENCE OF ISLAMIC AND WESTERN FINANCE MODELS Remuneration of sight accounts still conserves value in monetary and competition policy. Apart from the monetary function which the European Central Bank takes over, the interest rate represents an attractive factor for choosing a particular current account provider, even if most of the time clients pay banks’ interest rates back as account administration fees. Nevertheless, consumers continue to keep their savings in bank accounts, thanks especially to the wide range of banking services. This 158 Remuneration of sight accounts and competition between...