The possibility of opening an Islamic bank in Italy can be a reality but it requires respecting binding rules and specific procedures.
In fact, institutions that could offer Shariah compliant financial products and services could collaborate with Islamic banks or branches of an Islamic bank established in another European or extra-EU country.
In any case, each type of Islamic financial institution needs a Shariah board, or Shariah supervisory board (SSB), that sits at the top of the company’s governing structure.
The SSB is an independent and autonomous body of specialized jurists and scholars in Fiqh Muamalat (Islamic commercial jurisprudence) with the purpose of directing, reviewing and supervising the activities of the Islamic financial institution in order to ensure that all the operations and activities are Shariah compliant. The aim of providing binding Fatwas and other decisions is to respect the minimum Shariah standards and to harmonize market practice.
For example, the SSB provides Fatwas that declare financial products and contracts as permissible, certifies a non-Shariah compliant income or earnings, provides advice to the bank on the distribution of income to shareholders or investment account holders and fixes any possible violations.
Also, it is possible to do Islamic banking through the opening of a branch of an Islamic bank already set in another EU country. The authorization procedure is based on the European principles of Directive 93/22/CE ‘Investment Service Directive’ (ISD), which has since been replaced by Directive 2004/39/CE ‘Markets in Financial Instruments’. With reference to this, once a bank receives the license to conduct operations, it is allowed to perform banking and financial activities in the other EU countries without having to go through a different full license application process, thanks to the ‘European passport’.
Therefore, establishing a branch in Italy would present a unique opportunity to open access to banking and financial services to the Muslim residents in Italy and also to non-Muslim customers interested in Islamic finance.
Stefano Loconte is the managing partner at Loconte & Partners. He can be contacted at [email protected].