Purpose – The aims of this paper are: first, to draw attention to the issues of displaced commercial risk (DCR) which arise as a result of the risk characteristics of profit‐sharing investment accounts (PSIA), the main source of funding of Islamic banks in most jurisdictions; and, second, to...

Islamic banks are subject to religious audit in addition to the ormal financial auditing process which is carried out in other business organisations. The former type of audit is conducted by in‐house religious advisers who are employed by the bank. These advisers issue a special report to...

Reports that, unlike Western commercial banks, Islamic banks are prohibited by Islamic precepts to receive or pay interest, inter alia, in all their transactions. Argues that the Basle capital adequacy ratio (CAR), which was implemented in 1992 by regulatory authorities in many countries, is...