ABSTRACT
This study explains how Islamic banking regulation may facilitate in achieving the objective of Islamic sustainable finance, as literature has established a connection between environmental sustainability issues and emerging financial issues. Banks are the primary source of capital in many economies. Making the way in which they collectively handle these sustainability issues is a key legislative and regulatory concern. Specifically, we examine the role that prudential banking regulation and supervision may play in guiding, incentivizing, and encouraging financial institutions to take a stance in favour of sustainability. To achieve this, the study analyses some of the most important regulatory requirements and supervisory standards (BCBS, AAOIFI, and IFSB) that have emerged from best practices to deal with risk management, bank governance, and capital adequacy in Islamic banking for long-term sustainability.
