A further principle of profit sharing and hence risk sharing also ensures a high degree of transparency and disclosure, thereby a greater shared responsibility on the viability of the products. The rapid expansion of Islamic finance is reflected in more than 600 Islamic financial institutions operating in more than 75 countries in centres that are now beyond Muslim jurisdictions. Indeed, Islamic finance is increasingly becoming part of the growth strategies of an increasing number of global financial institutions. New horizons are also fast emerging following legislative and regulatory changes in several non-traditional markets that have now emerged as the fastest growing segment in the international financial system. In fact, the Banker’s latest 2011 Top 500 Islamic Financial Institutions report being released at this Summit shows that the global Islamic finance industry continues to experience double digit growth of 21%, with the Shariah compliant assets now breaching the USD1 trillion mark. The rapid expansion of Islamic finance essentially reflects its ability to meet the changing requirements of the global financial community and its competitiveness. The elements of checks and balances in Islamic finance that promote accountability and transparency enhances its potential as a stable form of financial intermediation. There is also a growing recognition that the inherent tenets of Islamic finance are aligned with the sustainable dimensions of ethical finance and responsible financing. As the new financial landscape emerges, it has also been accompanied by the development of ancilliary support services that include legal, accounting, taxation and Shariah advisory.

Chiarotti, Mathur, and Rajan (forthcoming), ‘Assessing Basel III: Impact of automatic distribution restrictions on regulatory capital and bank lending’, Bank of England Staff Working Paper. The authors apply a difference-in-difference approach to aggregate bank balance sheet data and granular loan-level data on syndicated lending to corporates. The latter allows the authors to control for important unobservable features in the aggregate data such as changes in credit demand and in borrowers’ risk. 12. To ensure that banks which have different concerns about MDAs nevertheless have similar probabilities of triggering the restrictions, the analysis considers also the banks’ capital surpluses to regulatory buffers. 13. During the Covid-19 pandemic, several jurisdictions including ECB/SSM Fed and BoE recommended banks to restrict or suspend dividends and share buybacks, but not AT1 coupons (see Svoronos and Vrbaski (2020) (2021)  and BCBC  ). 14. During the pandemic AT1 coupons were excluded from the scope of the blanket distributions restrictions that many jurisdictions imposed, so unlike for dividends banks’ ability to pay AT1 coupons was still linked to automatic distribution restrictions thresholds. 15. A somewhat extreme version of broad-based capital conservation – reflecting the unusual and extreme level of economic and market uncertainty at the time - was implemented during Covid-19 when PRA recommended the major UK deposit takers to cancel dividend payments, share buybacks and cash bonuses. 16.