CAPITAL REQUIREMENTS AND BANKING BEHAVIOUR FOR ISLAMIC BANKS

Many regulators have regarded minimum capital requirement as a successful factor in controlling the stability of the banking system. However, research, in particular on Islamic banks, has found that this tool may not necessarily be the most efficient in protecting the bank from systemic risk (Chapra and Khan, 2000; Sundararajan and Erico, 2002) as findings indicate that there are conflicts of interest between shareholders and other depositors’ rights on their funds.