Islamic Finance

Islamic banking & UK law

The primary principle of Islamic finance is that all forms of interest are forbidden. The Islamic financial model works on the basis of risk sharing.

The FSA's policy towards Islamic banks can be surmised as "no obstacles, no special favours".

The most important issues for the FSA are that of Islamic deposits. The UK legal definition of a deposit is: “a sum of money paid on terms under which it will be repaid either on demand or in circumstances agreed by the parties". However with a savings account there is a potential conflict between UK law, which requires capital certainty, and Sharia law, which requires the customer to accept the risk of a loss in order to have the possibility of a return.

Islamic banks solve this problem by offering full repayment of the investment but telling the customer how much should be repayable to comply with the risk-sharing formulation. This allows religious customers to choose not to accept full repayment.

Where to get help with banking law

Banking law refers to those laws, rules, regulations, precepts, statutes, and commandments which form the complex legal framework regulating banks.

Your guide to banking and finance solicitors

Banking and finance law covers many different areas that are always increasing. It is a highly regulated industry as you would expect.

A look at banking and finance law

Banking and finance law is the sphere of law which covers the movement of money between various parties, and regulates these transactions.