The new governing dynamics: Regulating Islamic banks in the global political economy

This thesis seeks to examine the connection between international bank supervision and Islamic banking, specifically, the question of how to supervise and regulate an Islamic bank in a conventional banking environment. I argue that because Islamic banking differs from conventional banking, and because a hard law supervisory approach would frustrate attempts to level the playing field, the way forward lies within the Basel Committee on Banking Supervision. The BCBS is premised on a decentralized approach to cross border bank supervision. Managed effectively, the BCBS can serve as a model for trans-national cooperation in both formal and informal settings, making regulation of Islamic banks an obvious candidate. However, at present, the BCBS does not regulate Islamic banks. The proposed recommendation involves the BCBS as facilitator and promoter of supervisory guidelines for Islamic banking. This requires the creation of a semi autonomous body (Islamic Banking Supervisory Committee) within the BCBS developing a supervisory programme that recognizes the differences and fosters an environment of competition and fair market practices.