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Financial Undertakings, Rules, and the Internal Market Framework: Challenges and Opportunities

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Book cover Islamic Finance in Europe

Abstract

This chapter takes a normative approach to examining Islamic finance within a non-Islamic setting, namely, the European Union (EU). The whole analysis is constructed on the premise that the Rome I regulation on contractual obligations in civil and commercial transactions is based on connections or conflicts between the laws of different States and may not be applied to Sharia rules on the management of money because they represent the law of communities rather than of States.

Section 2.1 outlines some introductive remarks; Sect. 2.2 argues for allocating the process of accommodating Islamic finance within the EU regulatory framework. Sections 2.3, 2.4, and 2.5 examine the normative approaches to the regulatory accommodation process, combining the “business-based” and the “cultural-based” approaches; the former concern Sharia-compliant financial undertakings from the point of view of the economic activity performed, while the latter consider Islamic finance as a cultural experience, where the adjective “cultural” implies that Islamic finance should be conceived at least as a set of thinking and behaviours that every Muslim gradually comes to endorse through a socio-educational process of induction.

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Notes

  1. 1.

    Valentino Cattelan (2010), Islamic finance and ethical investment: some points of reconsideration, in Mohammad Fahim Khan, Mario Porzio (eds), Islamic banking and finance in the European Union. A challenge, Edward Elgar publishing: Cheltenham, Glos, UK, p. 78.

  2. 2.

    More in-depth analysis in: Gohar Bilal (1999), Islamic Finance: Alternatives to the Western Model, 23 Fletcher Forum World Affairs 145, pp. 109–118.

  3. 3.

    Cattelan (2010), pp. 76–87.

  4. 4.

    Precisely. Regulation EC/593/2008, of 17 June 2008, published in OJEU, L 177/6, of 4.7.2008 (Rome I).

  5. 5.

    Behr Volker (2011), Rome I regulation. A—mostly—unified private international law of contractual relationship within—most—of the European Union, Journal of Law and Commerce, vol. 29, p. 241.

  6. 6.

    The list of policy actions and countries is by no means exhaustive. For an overview of the state of the art, see: Filippo di Mauro et al (2013), Islamic finance in Europe, Occasional Paper, n. 146, European Central Bank (ECB): Frankfurt, p. 25ff.

  7. 7.

    More details on the development of Islamic finance business: Michael Ainley et al. (2007), Islamic finance in the UK: regulation and challenges, Financial Service Authority (FSA) November 2007, https://www.isfin.net/sites/isfin.com/files/islamic_finance_in_the_uk.pdf; Rodney Wilson, (2010), Islamic banking in the United Kingdom, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, pp. 212–221; Jonathan Ercanbrak, (2013), Regulating Islamic financial institutions in the UK, in Cattelan (ed), Islamic finance in Europe. Towards a plural financial system, Edward Elgar publishing: Cheltenham, Glos, UK, pp. 157–175.

  8. 8.

    Ribā is often translated as “usury”, referring to the prohibition on paying out interest on credit. However, this is only a part of the story: according to sources, ribā principally regards sales contracts, covering any unjustified increase in the exchange of contract considerations. More details in: Frank Vogel (2010), Islamic finance: personal and enterprise banking, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, p. 46.

  9. 9.

    Murābaḥa is a sale-based transaction: a client who wants funding to purchase goods asks the bank to purchase the goods and then resell them to him. The bank calculates the price of the second sale taking into account the price of purchase and the pre-agreed mark-up above its own costs. More details in Vogel (2010), p. 54ff.

  10. 10.

    Muḍāraba is a profit-and-loss sharing business operation. Under this system, a capital provider (silent partner) and an entrepreneur (active partner) contribute either their own capital or their own time and work to the venture. Both of them are entitled to share in the business profits on a pro-rata basis, but only the capital provider takes on any business losses, except in the event of mismanagement by the active partner. More details in: Vogel (2010), pp. 40–60.

  11. 11.

    It is noteworthy that the Bank of London and the Middle East is the first Islamic bank to have the European passport for cross-border services within the EU. See: Ainley et al. (2007), p. 28.

  12. 12.

    Ṣukūk may be considered as -compliant bonds. They are equivalent to share certificates. See: Gian Maria Piccinelli (2010), The provision and management of savings: the client-partner model, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, pp. 23–39, especially pp. 32–35.

  13. 13.

    Bank of England (2016), Consultation paper. Establishing -compliant central bank liquidity facility, February, 4.

  14. 14.

    In 2013, Dr. Ercanbrak wrote that “[d]espite the Islamic finance industry’s international growth, UK domestic demand for Islamic financial products and services may be limited”. See: Ercanbrak (2013), p. 160.

  15. 15.

    In the following sections (namely, Sect. 2.4), this study draws a comparison between UCITS funds as regulated in the community-based law and the basics of -compliant investment funds.

  16. 16.

    Eleanor de Rosmorduc, Florence Stainer (2013), Luxembourg: a leading domicile for Sharīʿa compliant investments, in Cattelan, (ed), Islamic finance in Europe, pp. 179–191.

  17. 17.

    http://www.oasiscrescent.ie/default/content.aspx?initial=true&moveto=155

  18. 18.

    See: Martin Moloney, (2015), Address by IFLC Head of Markets Policy at the UCD School of Law, at https://www.centralbank.ie/news/article/martin-moloney-at-iflc-at-the-ucd-school-of-law; Simon O’Neill (2015), The Islamic finance industry in Ireland, Country Report Ireland, Islamic Finance News, December, at http://www.aicc.ie/content/publications-0

  19. 19.

    More details in: Ibrahim-Zeyyad Cekici (2013), Managing Islamic finance vis-à-vis laïcité: the case of France, in Cattelan, V. (ed), Islamic finance in Europe, pp. 192–202.

  20. 20.

    Azadeh Farhoush and Michael Mahlknecht (2013), A critical view on Islamic finance in Germany, in Cattelan (ed), Islamic finance in Europe, pp. 203–212, critically analyse the development of Islamic finance in Germany after the 1990s fraud scandal. On the regulatory aspects of Islamic finance accommodation within the German legal system, see: Johannes Engels (2010), German banking supervision and its relationship to Islamic banks, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, pp. 174–188.

  21. 21.

    di Mauro et al. (2013), p. 26f.

  22. 22.

    This is confirmed by: Riccardo Ferrazza (2017), Arriva in Parlamento la proposta per portare la finanza islamica in Italia, Il Sole 24 Ore, 18th May.

  23. 23.

    More details in: Gabriella Gimigliano (2016), Investigating Islamic banking in Italy. Business-based and cultural-based analyses as complementary approaches, International Journal of Islamic and Middle Eastern Finance and Management, vol. 9 (3), pp. 364–387; Simone Alvaro (2014), La finanza islamica nel contesto giuridico ed. economico italiano, Quaderni di ricerca giuridica Consob, n. 6, pp. 1–68; Giorgio Gomel et al. (2010), Finanza islamica e sistemi finanziari convenzionali, Questioni di Economia e Finanza: Banca d’Italia, Quaderno n. 73, pp. 1–77, https://www.bancaditalia.it/pubblicazioni/qef/2010-0073/QEF_73.pdf; Luigi Donato, Maria Alessandra Freni (2010), Islamic banking and prudential supervision in Italy, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, pp. 189–206; Pietro Abbadessa, (2010), Islamic banking: impression of an Italian jurist, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, pp. 207–211.

  24. 24.

    COM (2015) 268 final.

  25. 25.

    For example, thanks to the CMU, European businesses should be able to raise funding as easily as large companies; the cost of investing and access to investment products should be levelled out, or there should be fewer obstacles to seeking financing in another Member State.

  26. 26.

    Valentino Cattelan (2016), “Equal for equal, hand to hand”: comparing Islamic and Western money, in Gabriella Gimigliano (ed), Money, Payment Systems and the European Union, Cambridge Scholars Publishing: Newcastle Upon Tyne, pp. 77–101.

  27. 27.

    Mushāraka is, like muḍāraba, a profit-and-loss sharing business transaction. In mushāraka, two or more partners pool their financial resources to operate a business; they have a share in the returns and losses on a pro-rata basis. For more details, see: Vogel (2010), pp. 40–60.

  28. 28.

    According to Art. 26 of the Treaty on the Functioning of the European Union (hereafter, TFEU), the “internal market” covers “an area without frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties”.

  29. 29.

    The “Home State” is the Member State where the head office and registered office of the financial entity are placed.

  30. 30.

    The “Host State” is the Member State where such an entity, once formed in an EU country, provides services or sets up branches.

  31. 31.

    Generally speaking, a broader and stricter harmonisation process has developed in the Eurozone.

  32. 32.

    Regarding the main legislation on the authorisation and supervision of banks, payment institutions, electronic money institutions, UCITS, and investment firms, see: directive 2013/36/EU on access to the activity and the prudential supervision of credit institutions (CRD IV directive); regulation n. 575/2013/EU on prudential requirements for credit institutions and investment firms; directive 2015/2366/EU on payment services in the internal market (PSD2); directive 2009/110/EC on the electronic money institutions (IMEL2); directive 2009/65/EC on UCITS (UCITS V directive) directive 2014/65/EU on markets in financial instruments (MIFID2).

  33. 33.

    Art. 32, directive 2015/2366/EU. It is true that some Member States may have decided to grant the waiver in compliance with Art. 32, para. 1, PSD2, but some others may not (“may exempt or allow … to exempt”). Furthermore, two or more Member States all granting the above-mentioned waiver may have exempted payment institutions from different procedure rules and licensing conditions (“all or part”). The same type of waiver is expressly provided also for electronic money institutions and investment firms, respectively, under Art. 9, IMEL 2 directive and Art. 3, MIFID2 directive.

  34. 34.

    Nevertheless, no higher regulative costs arise because any -compliant institution meeting the waiver conditions has already made its business choice, opting to provide its services on a national market in order to enjoy lighter licensing and supervisory requirements. If such an entity plans to establish a branch or provide its services in/to another Member State, it must apply for new authorisation in the host country.

  35. 35.

    Both are applied to credit institutions, investment firms, collective investment undertakings, payment institutions, and electronic money institutions.

  36. 36.

    It should be recalled that the single passport is not applied to branches of financial undertakings with their head office and registered office in a non-EU country. It may be applied to subsidiaries from non-EU countries when they meet community-based requirements. However, accessing the internal market as non-EU financial entities does not seem to increase the gap between the community- and State-based frameworks. It is true that no harmonised set of rules has been provided for third-country branches, but the EU banking regulations have established, since the Second Banking Directive, that “Member States shall not apply to branches of credit institutions having their head office in a third country, when commencing or continuing to carry out their business, provisions which result in more favourable treatment than that accorded to branches of credit institutions having their head office in the Union” (Art. 47, para. 1, 2013 Consolidated Banking directive). In addition, the Union is entrusted with entering agreements with third countries with a view to applying non-EU branches with identical treatment throughout the territory of the Union (Art. 47, para. 3, 2013 Consolidated Banking directive).

  37. 37.

    Cassis de Dijon, case 120/78, Judgement of 20.2.1979.

  38. 38.

    See: Ercanbrak (2013), p. 165.

  39. 39.

    Ainley et al. (2007), p. 11ff.

  40. 40.

    More details in: Ainley et al. (2007), p. 8f.

  41. 41.

    With regard to murābaḥa-based business transactions, please see footnote n. 9.

  42. 42.

    Concerning ijāra-based or lease operations, see: Vogel (2010), p. 53.

  43. 43.

    Wilson (2010), p. 215.

  44. 44.

    Ercanbrak (2013), p. 165. Dr. Ercanbrak underlines how the UK lawmakers do not refer expressly to Islamic mortgages, preferring more general expressions, such as “alternative” financial returns, financial instruments, investment bonds, and so forth (pp. 164–165).

  45. 45.

    de Rosmourduc and Stainer (2013), p. 187; Cekici (2013), p. 193; Edana Richardson (2011), Accommodation of Islamic finance in Ireland’s financial regulation: a comparative study of wholesale financial products, 34 Dublin University Law Journal, pp. 127–154.

    Although there is no concrete experience of Islamic banking and financial business in Italy, the supervisory authority may tend to prefer a neutral approach. Indeed, Donato and Freni (2010), p. 189, wrote: “In any event, the entry of Islamic finance cannot be dealt with by imagining the creation of a special regulatory regime (adoption of ad hoc rules) either for or against”.

  46. 46.

    di Mauro et al. (2013), p. 36. The decision to treat -compliant financial undertakings as ethical businesses is easily inferred from the sources of law. By contrast, the comparison between Islamic finance and socially responsible enterprises may be explained by referring to as the law of the Muslim community. However, going further in depth, one might also consider the idea of distributive justice as established by Islam, whereby every Muslim is supposed to donate 2.5 per cent of their yearly savings or income to charity as zakāt. The idea that the right to private property is less important than the duty of ensuring social justice. See: Samiul Hasan (2007), The Islamic concept of social justice: its possible contribution to ensuring harmony and peaceful coexistence in a globalised world, Macquarie Law Journal, vol. 7, pp. 167–183.

  47. 47.

    According to the 2007 FSA report, the success of Islamic finance will depend on the “ability to demonstrate how the products are underpinned by generally-accepted ethical principles. If -compliant products are no longer seen as ʻexoticʼ or niche products, the industry could benefit from economies of scale which would help to sustain it over the longer-term”. FSA, Islamic finance in the UK: regulation and challenges, p. 29.

  48. 48.

    This construction is also confirmed in the assumed neutrality of commercial law towards “national ethos”: see, Ercanbrak (2013), p. 163.

  49. 49.

    Valentino Cattelan (2013), economics as autonomous paradigm: theoretical approach and operative outcomes, Journal of Islamic Perspective on Science, Technology and Society, vol. 1 (1), pp. 3–11.

  50. 50.

    It goes without saying that any ethical financial intermediaries will have an ethical expert or an advisory committee. However, each Member State makes its own policy choices on the role of such a committee within the regular corporate governance structure.

  51. 51.

    Mehmet Asutay (2013), Islamic moral economy as the foundation of Islamic finance, in Valentino Cattelan (ed), Islamic finance in Europe. Towards a plural financial system, Edward Elgar publishing: Cheltenham, Glos, UK, pp. 55–68. In addition, drawing a comparison between conventional and Islamic finance, Jean Francois Seznec (1999), Ethics, Islamic banking and the global financial market, 23 Fletcher Forum World Affairs 161, p. 120, argued: “As a religion based upon justice, Islam can serve as an ethical framework for regulating monetary transactions between people and, in this way, influence the global financial marketplace”.

  52. 52.

    According to Dr. Asutay, IME pursues “social welfare” and is based upon three main assumptions, namely that individuals are (i) all equidistant from the Creator, (ii) on an equal footing with each other, and (iii) God’s vice regent on Earth, to fulfil His will on Earth. Therefore, the growth of individuals may not be considered counter to environmental and social growth; any asset managed either by a private or by a public entity is to be driven by social responsibility. Within this framework, the individuals enjoy “free will”, but the freedom must be interpreted in such a way as to meet individuals’ functional responsibility towards society.

  53. 53.

    Celia De Anca (2010), Investing with values: ethical investment versus Islamic investment, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, Edward Elgar publishing: Cheltenham, Glos, UK, pp. 128–147.

  54. 54.

    In fact, ethical investing business is rooted in the Quaker and Methodist religious movements of the last century. The first ethical investment initiatives in Europe can be found in the United Kingdom and are linked to the Anglican Church. De Anca (2010), p. 128f.

  55. 55.

    De Anca (2010), p. 143.

  56. 56.

    See: Ercanbrak (2013), p. 160.

  57. 57.

    On the definition of business-based and cultural-based normative approaches, please see, in this chapter, Sect. 2.1.

  58. 58.

    Asutay (2013), p. 56.

  59. 59.

    According to Dr. Cattelan, “[I]n IME, economics is conceptualized as a value-oriented proposition, frequently referring to homo-Islamicus as an ethical antithesis to homo-economicus (…) by identifying the rational/secular homo-economicus as acting in denial of any social justice, as reduction of human being to greedy economic actor, outside Islam, is apotictically proclaimed. The anthropological nihilism represents an unfortunate oversimplification, that not only obscures the effort of conventional economics to promote social justice but also forgets deep religious elements that Western capitalism embodies”. Cattelan (2013b), p. 5.

  60. 60.

    Cattelan (2013b), p. 5.

  61. 61.

    Cattelan (2010), p. 78.

  62. 62.

    See: Ainley et al. (2007), p. 12f. This, in turn, may influence their legal construction and, accordingly, the conclusion as to whether such operations are permissible and, if so, which legal discipline would be applicable.

  63. 63.

    Directive 2014/49/EU of 16 April 2014, O.J.E.U. 12.6.2014, L173/149.

  64. 64.

    Art. 2, directive 2014/49/EU.

  65. 65.

    Zamir Iqbal, Abbas Mirakhor (1987), Islamic banking, International Monetary Fund. Washington, p. 2f. Accordingly, sale-based contracts such as ijāra or murābaḥa and partnership contracts like muḍāraba and mushāraka have been established.

  66. 66.

    When partnership contracts, such as muḍāraba and mushāraka, are applied to banking, on the liability side, the bank performs the role of the entrepreneur and the depositor is the capital provider, whereas on the asset side, the bank and the depositor swap places.

  67. 67.

    Art. 2, directive 2014/49/EU.

  68. 68.

    If the deposit holders accept, they are advised that their behaviour will not be in compliance with rules. See: Ainley, p. 14f. Ercanbrak (2013), p. 168.

  69. 69.

    Concerning the case of the Islamic British Bank (IBB), in the business plan submitted, it proposed retail banking services and, among them, unrestricted PSIAs as substitutes for conventional deposits. The banking licence was issued on the condition that any unrestricted PSIAs would be “capital certain” and returns would be based on a profit-sharing approach. However, to reconcile the conventional UK statutory rules with principles, the FSA and the IBB agreed that PSIA holders were not required to accept a share of the losses provided the bank remained solvent, but could (if they so choose, for religious reasons) volunteer to accept them. As Dr. Archer emphasised, “This arrangement allowed the bank’s customers (or those who so wished) to be compliant, but the bank’s unrestricted investment accounts (being contractually ʻcapital certainʼ) were not themselves compliant, and hence neither was the bank, even though it was permitted to call itself ʻIslamic Bank of Britainʼ”. See: Simon Archer (2009), Profit-sharing investment accounts in Islamic banks: regulatory problems and possible solutions, Journal of Banking Regulation, pp. 300–306.

  70. 70.

    Jennifer Payne (2015), The reform of deposit guarantee schemes in Europe, European Company and Financial Law Review (4), pp. 539–561.

  71. 71.

    Unrestricted and restricted investment deposits are both muḍāraba-based transactions, but while the former allow -compliant financial institutions to take title to the placed funds and invest them at their discretion, in the latter the depositor is entitled to give instructions concerning the type, timing, and use of the investments.

  72. 72.

    Takāful schemes represent the alternative to insurance contracts within the Islamic financial framework. This contractual scheme is based on the concept of donation or voluntary individual contribution to a risk pool (the Takāful fund) on condition that they receive a compensation from the pool for a specific type of loss they may incur. Amplius: Simon Archer, Rifaat Karim Abdel Ahmed, Volker Nienhaus (eds) (2009), Takāful Islamic insurance. Concepts and regulatory issues, Wiley and Sons: Singapore.

  73. 73.

    Md Khairuddin Hj Arshad (2011), Implementation of an Islamic Deposit Insurance System for the Islamic Financial Services Industry, Fourth Islamic Financial Stability Forum, Kuala Lumpur, 17 November 2011, p. 4: http://www.ifsb.org

  74. 74.

    See, above all: Elisabetta Montanaro (2010), Islamic banking: a challenge for the Basel Capital Accord, in Fahim Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, Edward Elgar publishing: Cheltenham, Glos, UK, pp. 112–127.

  75. 75.

    On conflicts of interest, MIFID2 states that financial undertakings must “take all appropriate steps to identify and to prevent or manage conflicts of interest between themselves, including their managers, employees and tied agents, or any person directly or indirectly linked to them by control and their clients or between one client and another that arise in the course of providing any investment and ancillary services, or combinations thereof”.

  76. 76.

    See: MIFID2, namely preambles (53) and (54), as well as Arts. 9 and 23.

  77. 77.

    See: Kilian Bälz (2008), risk? How Islamic finance has transformed Islamic contract law, Harvard Law School: Occasional Paper, n. 9, p. 23. Mr. Bälz referred to risk, adding that “[l]aw provides transaction security. In Islamic finance, the role of is reversed. is a risk, which allows the transaction to be attacked on the basis that it did not conform to Islamic legal principles”.

  78. 78.

    Mathias Rohe (2004), Application of Sharīʿa rules in Europe: scope and limits, Die Welt des Islams, New Series, vol. 44 (3), pp. 323–350 (in particular, p. 345f.); Hasan (2007), p. 183.

  79. 79.

    The regulatory standardisation process is carried out by international organisations or non-profit entities, such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Islamic Financial Services Board (IFSB), or the International Islamic Financial Market (IIFM). For an interesting analysis of this process, see: Nicholas H. Foster (2007), Islamic finance law as an emergent legal system, Arab Law Quarterly 21, pp. 170–188.

  80. 80.

    Bälz (2008), p. 23f.

  81. 81.

    This is particularly true considering the contractual asymmetries between financial service providers and retail clients.

  82. 82.

    Bälz (2008), p. 24. This sounds like a market-based approach. As Dr. de Anca suggests: “The success of the movement will lie in its diversity, not in defining what an ethical investment is, in absolute terms, but in offering the tools to allow for an individual choice according to an individual ethic within a large diversity of criteria”. De Anca (2010), p. 145.

  83. 83.

    See: Foster (2007), p. 175.

  84. 84.

    Olha Cherednychenko (2014), Public Supervision over private relationships: towards European Supervision Private Law?, European Review of Private Law, pp. 37–68 (esp. p. 63).

  85. 85.

    Cattelan (2013b), pp. 3ff.

  86. 86.

    See, also, Cattelan (2010), p. 77.

  87. 87.

    Cattelan (2013a), p. 7; Valentino Cattelan (2013), Introduction. Babel, Islamic finance and Europe: preliminary notes on property rights pluralism, in Cattelan (ed), Islamic finance in Europe. Towards a plural financial system, Edward Elgar publishing: Cheltenham, Glos, UK, pp. 1–12.

  88. 88.

    See, Sect. 2.4, in particular, Cattelan references.

  89. 89.

    Santi Romano (1962), L’ordinamento giuridico, Sansoni: Firenze.

  90. 90.

    Filippo Fontanelli (2011), Santi Romano and L’Ordinamento Giuridico: the relevance of a forgotten masterpiece for contemporary international, transnational and global legal relations, Transnational Legal Theory (2), pp. 67–117.

  91. 91.

    On the concept of clausole generali, see: Mario Libertini (2011), Le clausole generali nel diritto commerciale ed. industriale, paper presentation, at the general meeting of “Orizzonti del diritto commerciale” association: Rome.

  92. 92.

    See footnote n. 71.

  93. 93.

    Foster (2007), p. 186f.

  94. 94.

    See also Cattelan (2013b), p. 9.

  95. 95.

    See Sect. 2.4.

  96. 96.

    Gabriella Gimigliano (2010), Islamic banking and the duty of accommodation, in Khan, Porzio (eds), Islamic banking and finance in the European Union. A Challenge, p. 154.

  97. 97.

    Louis Charpentier. (1998), The European Court of Justice and the rhetoric of affirmative action, European University Institute, Working Paper RSC, 98/30.

  98. 98.

    For more details on the concept of “undertaking” in the EU legal framework, see: Luc Gyselen (2000), ‘Case law’, Common Market Law Review, 37 (2), pp. 425–48.

  99. 99.

    Luca Errico, Mitra Farahbaksh (1998), Islamic banking: issues in prudential regulations and supervision, International Monetary Fund Working Paper (30), p. 9f. In the chapter, the authors refer to the demand deposits provided by Islamic banking in a two-window system and draw a comparison between the demand deposits provided in a two-tier muḍāraba, where the assets and liabilities of a bank’s balance sheet are fully integrated.

  100. 100.

    Art. 4, n. 12, PSD2.

  101. 101.

    Arts. 10 and 12 PSD2.

  102. 102.

    Art. 4 (8), MIFID2.

  103. 103.

    Art. 1, UCITS directive, consolidated version.

  104. 104.

    Errico, Farahbaksh (1998), p. 10f.

  105. 105.

    Said M. Elfakhani, M. Kabir Hassan and Yusuf M. Sidani (2007), Islamic mutual funds, in M. Kabir Hassan, Mervyn Lewis (eds), Handbook of Islamic banking, Cheltenham: UK, p. 259.

  106. 106.

    Mohammed Fahim Khan (2010), Islamic banking in Europe: the regulatory challenge, in Khan, Porzio (eds), Islamic banking and finance in the European Union. A challenge, Cheltenham, pp. 61–75.

  107. 107.

    Indeed, according to Art. 18 TFEU: “Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt rules designed to prohibit such discrimination”.

  108. 108.

    An overview: Jan Hendrik Dalhuisen (2007), Financial Services, products, risks and regulation in Europe after the EU 1998 Action Plan and Basle II, European Business Law Review, pp. 819–1091.

  109. 109.

    See: Ercanbrak (2013), p. 160.

  110. 110.

    Committee on Payments and Market Infrastructure – World Bank Group (2015), Payment aspects of financial inclusion. Consultative report, 9f., http://www.worldbank.org

  111. 111.

    Gabriella Gimigliano (2013), Islamic banking in the European Union legal framework, in Cattelan, V. (ed), Islamic finance in Europe. Towards a plural financial system, Edward Elgar publishing: Cheltenham, Glos, UK, pp. 143–156.

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  1. Business and Law Department, University of Siena, Siena, Italy

    Gabriella Gimigliano

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  1. Pantheon-Sorbonne University, Paris, France

    Mohyedine Hajjar

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Gimigliano, G. (2019). Financial Undertakings, Rules, and the Internal Market Framework: Challenges and Opportunities. In: Hajjar, M. (eds) Islamic Finance in Europe. Palgrave Studies in Islamic Banking, Finance, and Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-04094-9_2

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