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The paper provides robust evidence that compliance with Basel Core Principles (BCPs) has a strong positive effect on the Z-score of conventional banks, albeit less pronounced on the Zscore of Islamic banks. Using a sample of banks operating in 19 developing countries, the results appear to be driven by capital ratios, a component of Z-score for the two types of banks. Even though smaller on Islamic banks, individual chapters of BCPs also suggest a positive effect on the stability of conventional banks. The findings support the effective role of BCP standards in improving bank stability, whose important implications led to the Islamic Financial Services Board (IFSB) publication of new recommendations in 2015 to bring BCP standards in line with the Core Principles for Islamic Finance Regulation (CPIFRs) standards. Our findings suggest that because Islamic banks are benchmarked closely to BCPs, the implementation of CPFIRs should also positively affect their stability.

Banks and Banking --- Finance: General --- Islamic Banking and Finance --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Comparative Analysis of Economic Systems --- Financial Institutions and Services: Government Policy and Regulation --- Other Economic Systems: Public Economics --- Financial Economics --- Financial services law & regulation --- Banking --- Finance --- Basel Core Principles --- Islamic banking --- Bank regulation --- Bank supervision --- Financial regulation and supervision --- Bank soundness --- Financial sector policy and analysis --- Financial services --- Banks and banking --- State supervision --- Islamic countries --- United Kingdom

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This paper presents country experiences with reforms to strengthen regulatory oversight of the Islamic banking sector. Based on the selected country experiences, a number of important lessons and policy options can be drawn that have implications for the stable and sound development of Islamic banking. An enabling regulatory and institutional framework and a level playing field for conventional and Islamic banks is critical for the sound and stable growth of the Islamic banking industry. The country experiences also underscore the importance of providing an enabling framework while letting market forces determine the size of the industry.

Banks and banking --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Finance --- Financial institutions --- Money --- Banks and Banking --- Finance: General --- Financial Risk Management --- Industries: Financial Services --- Islamic Banking and Finance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Other Economic Systems: Public Economics --- Financial Economics --- Portfolio Choice --- Investment Decisions --- Economic & financial crises & disasters --- Islamic banking --- Deposit insurance --- Liquidity management --- Financial services --- Asset and liability management --- Financial crises --- Liquidity --- Islamic countries --- Crisis management --- Economics --- Financial services industry --- Bahrain, Kingdom of