Studies in Islamic Finance, Accounting and Governance series
Edited by M. Fahim Khan and Mario Porzio
Chapter 13: Islamic Banking and Prudential Supervision in Italy
Luigi Donato and Maria Alessandra Freni INTRODUCTION This chapter analyses the operations of Islamic financial institutions from the perspective of a conventional financial supervisor, as the Bank of Italy is, in order to establish whether and to what extent they could participate in our national market. Before entering into the details of this issue some preliminary considerations are needed. On the one hand there is a limit to the analysis stemming from the fact that to date Italy has had no direct, practical experience with Islamic financial institutions. As a result the analysis and the conclusions necessarily suffer from some degree of abstractness. This limitation can be overcome, at least in part, by drawing on the experience of other national markets with a regulatory framework similar to Italy’s. Supervision is no longer conceived as a set of strictly domestic arrangements but as part of a broader system in which the basic rules are European or international. What happens within this global supervisory system can certainly help us in understanding phenomena, such as Islamic finance, that are not concretely present at the national level. On the other hand there is a secure point of reference that consists of the standards and basic supervisory rules that cannot be altered at the national level because, as noted, they are founded at the EU level or higher. The regulatory framework governing financial activities in Italy and Europe rests upon objective rules whose purpose is to ensure the prudent management of intermediaries and the stability...
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