Basel Capital Adequacy Ratio Standard in The Light of Islamic Law Perspective
DOI:
https://doi.org/10.24090/icms.2016.1833Keywords:
basel capital accord, car, jurisprudential maxim, falÄh, maá¹£laḥatAbstract
Bank is one of the most important pillars of economy activities. However, banking sector has a real potential crisis threat. Alongside with the steady current global banking development, financial crises that have happened clearly affected global economy. Based on that situation, BIS (Bank for International Settlement) – an international financial standard setting organization, realizes the urgency to establishan international financial standard and supervision to anticipate future potential financial crises. This research aims to identify how Capital Adequacy Ratio Standard in Basel Capital Accord (II) based on Islamic law perspective. The research is conducted by analyzing Basel Capital Accord published by BIS. The research uses library research method to find out the aimed result. The focus is on the 1st pillar of Basel II publication that is Minimum Capital Requirements (CAR) policy. CAR, as an Islamic economics policy, will be analyzed using falÄḥ approach. FalÄḥ is an Islamic economics objective that consists of happiness, success, accomplishment or good luck concept. The earthly dimension of falÄḥ has some parameters that can be used to analyze Islamic economics policy. Additionally, the Islamic fiqh maxim takes part in analyzing the policy. The maá¹£laḥat concept in fiqh maxim approach shares aim with falÄḥ concept in the sense that all of sharia law aims for success, happiness, eternal survival etc. The maá¹£laḥat can be accomplished by extinguishing mafsadat or seizing maá¹£laḥat. The maá¹£laḥat aspect is essential to determine the compatibility Basel Capital Accord with jurisprudential maxim i.e harm must be dispelled (al-dharÄru yuzÄl). The conclusion results are, 1) Basel Capital Accord focuses on macro-prudential aspect in order to anticipate potential financial crises, 2) beneficial/interest (maá¹£laḥat) aspects of the hereafter, cooperation principle, justice, fairness and the prohibition of exploitation are not the core value of Basel Capital Accord frame work, thus 3) the achievement of maslahat as intended by sharia i.e. jurisprudential maxim are not convincing. Therefore, 4) Basel Capital Accord as a regulation basis is not in line with jurisprudential maxim i.e harm must be dispelled (al-dharÄru yuzÄl).Downloads
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References
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Ahmed, Liaquat. Lords of Finance .New York. Penguin. 2009
Al-Jurjani, Ali Ibn Muhammad. Al-Ta’rifat.Tt.Dar Al-Fikri Al Arabi
Al-Qur’Än and Its Translation. Madinah : Departement of Hajj and Waqf Kingdom of Saudi Arabia. 1411 H
Al-Subki, TÄj al-DÄ«n. Al-AshbÄh wal-NadhÄir. Beirut. Dar al-Kutub al-Īlmiyyah. 1991
Al-SalÄm, Izzudin bin ‘Abd. Qawaid al-AhkÄm fi MashÄlih al-Anam. DÄr al-Jail. 1980
Al-Isfahani, RÄghib. al-MufradÄt fÄ« al-Gharib al-Qur’Än. Beirut . Dar al Ma’rifat, 1324 H
Andrew S Abel et al. “Macroeconomics 7th editionâ€, USA. Addison Wesley. 2011
Archer and Kareem, Simon, Rifa’at Abdel. Islamic Finance : The Regulatory Challenge, ed. Simon Archer and Rifa’at Abdul Kareem. Singapore: John Willey & Sons. 2013
Bank for International Settlement. A Brief History of Basel Committee. Basel . BIS. 2015
Bank for International Settlement. This is The BIS. Basel. BIS .2005
Bank Indonesia. Basel II at Glance. Jakarta. Bank Indonesia.2006
Bank Indonesia Circular Letter No. 13/6/DPNP dated 18 February 2011, Concerning Guidelines on Calculation of Risk-Based Weighted Assets (ATMR) for Credit Risk using standard approach
Bank Indonesia Circular Letter No.11/3/DNP Sebagi Petunjuk Teknis PBI No10/15/PBI/2008 tentang Kewajiban Penyediaan Modal Minimum Bank Umum
Bank Indonesia Circular Letter No.11 / 3 / DPNP Perhitungan Aset Tertimbang Menurut Risiko (ATMR) untuk Risiko Operasional dengan Menggunakan Pendekatan Indikator Dasar (PID)
Bank Indonesia. Krisis Global dan Penyelamatan Sistem Perbankan Indonesia. Jakarta. Bank Indonesia. 2010
Bank Indonesia Regulation No. 13/23/PBI/2011 concerning Application of Risks Management for Sharia Banks and Sharia Business Units
Bank Indonesia Regulation Nomor 10/15/PBI/2008 Regarding The Capital Adequacy Ratio for Commercial Bank
Basel Committee on Banking Supervision. International Convergence of Capital Measurement and Capital Standards. Basel . BCBS. 2005
Basel Committee on Banking Supervision. International Convergence Of Capital Measurement And Capital Standards.Basel . BCBS. 1988 updated in 1998
Basel Committee on Banking Supervision.Amendment to the Capital Accord to Incorporate Market Risks.Basel : BCBS. 2005
Cambridge Advance Learner Dictionary 4th ed. (Cambridge: Cambridge University Press. 2013)
Chapra, Umer,â€Challenges Facing the Islamic Financial Industry†,dalam Handbook Of Islamic Banking ed. M. Kabir Hasan dan Mervyn K Lewis (Clatenham: Edward Edgar Publishing, Inc.,2007)
Chapra, Umer. Toward a Just Monetary System .Leicester. The Islamic Foundation. 1986
Group G-20. Enhancing Financial Stability and Resilience: Macroprudential Policy, Tools, and Systems for the Future. Group G-20. Working Paper G-20 2010
Gup, Benton E. Banking and Financial Institutions, A Guide for Directors, Investors and Counterparties. New Jersey. John Wiley and Son Inc. 2011
Kenneth Carling et al. Capital Charges under Basel II: Corporate Credit Risk Modelling and the Macro Economy. Sweden . Sveriges Riksbank Working Paper Series No 142 September 2002
Khan, Akram. An Introduction to Islamic Economics. Islamabad. The International Institute of Islamic Thought.1994
Hallaq, Wael B .An Introduction To Islamic Law .New York .Cambridge University Press. 2009
Mishkin, Frederic F. The economics of Money, Banking, and Financial Markets. USA. Addison and Wesley.2004
Muhammad Edhie Purnawan dan M. Abd. Nasir,The Role of Macroprudential Policy to Manage Exchange Rate Volatility, Excess Banking Liquidity and Credits. Banking and Monetary Economics Bulletin. Volume 18. No 1. July 2015
Rulindo, Ronald. Understanding Unique Risks of Islamic Banking, proceeding at the 2nd Seminar on Islamic Deposit Insurance Understanding the Fundamentals of Islamic Banking and Deposit Insurance .Kuala Lumpur . IFSB. 2009
Slovik, Patrick. Systemically Important Banks and Capital Regulation Challenges, OECD Economics Department Working Papers. No. 916, OECD Publishing. 2012
Weder and Wedow, Beatrice and Michael. Will Basel II Affect International Capital flows to Emerging Markets?. France. OECD Development Centre - Technical Papers
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Published
2016-10-24
How to Cite
Ibnu, A. R. (2016). Basel Capital Adequacy Ratio Standard in The Light of Islamic Law Perspective. International Conference of Moslem Society, 1, 308–317. https://doi.org/10.24090/icms.2016.1833
Conference Proceedings Volume
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ICMS 2016
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