A critical assessment of the Islamic Banks governance under English law: legal pioneering or pragmatic adaptation?
Dr. Nehad Khanfar
Islamic College-Middlesex University – London-UK
Abstract:
In the last ten years Islamic banking and finance became part of the British financial market debate. More, financial, academic, consultancy firms, and individuals showed interest in Islamic banking, financial products and transactions. Based on unprecedented interest and demand, the British government and regulatory bodies were urged to regulate Islamic banking to comply with English law and regulations. In other words, the government would not afford losing the potential adding value of Islamic banking and finance, and needed to have Islamic banking activities law compliant. Despite the fact that Islamic banking comes from different legal theory and adopts different law philosophy from English law, the government was required to regulate Islamic banks and Islamic financial activities, governance included, to comply with the law of land. To some extent, the Financial Conduct Authority (FCA) previously called FSA (Financial Services Authority), gradually, succeeded to develop regulation of Islamic financial activities in order to incorporate it within the English legal system. This paper, will critically examine to what extent the UK regulatory bodies succeeded to create clear rules of Islamic bank’s governance. It also aims to critically assess how creative the legislators were in establishing legal rules combining two different legal philosophies. Furthermore, this paper will analytically investigate whether Islamic bank’s governance is crafted and positioned using a pioneering legal approach or was pragmatically adapted as a response to the circumstantial necessity.