By and large, Islamic banks are supervised using the same methodology and approaches adopted for conventional bank. Suitable modifications are needed to delve into oversight of Shariah compliance, a task daunted by the lack of Shariah expertise in regulators and differences in fiqh. A review of Shariah compliance will help facilitate innovation and enhance transparency and disclosure in Islamic banks.
In some cases, for example trading book items, fair value information may indeed be useful. There are however a set of possible measures which may help address the described shortcomings and to – at least partially – reconcile the needs of investors and prudential regulators.