&The laws and regulations are designed to supervise, identify, and dis-
cover abusers of the system and to examine the safety and soundness of
the institutions entrusted with people’s hard-earned deposits, invest-
ments, and assets.
&The laws and regulations are based on the vast body of recorded hu-
man experience throughout history.
&The laws are designed to prevent fraud by those who attempt to de-
fraud people in the marketplace and those who want to take advantage
of people who do not have knowledge, are not educated, or are not
well informed, by insisting on full disclosure, transparency, and fair
representation.
&The regulations are in continual development because they are adapted
to correct previous faults in the design of the system, with an objective
to reach perfection as closely as is humanly possible.
&The laws and regulations require that any financial transaction must be
translated into an implied interest rate (as required by Regulation Z
in the United States) that includes the effect of all fees and expenses so
that the consumer can make a fair comparison and an educated deci-
sion in his or her financial dealings.
&The regulations do not allow depository institutions (i.e., banks) to
own properties except in cases where these properties are owned by de-
fault, such as foreclosure (this concept is known in U.S. banking as
other real estate owned, or OREO). Banks are encouraged to dispose
of these properties as soon as practically possible.
&The laws and regulations include a safety valve that gives borrowers
who cannot meet their obligations ways and means to restructure and
reorganize in an orderly fashion without destroying their facilities or
their investments, which might cause the loss of jobs and create more
problems (U.S. bankruptcy laws).
&The laws prohibit the payment of interest on bank demand deposits
(Regulation Q in the United States). Interest-paying accounts are only
allowed with strict conditions and limited withdrawals (see Regulation
D in the United States).
&The regulations offer standardized, frequently used, and fundamentally
needed contracts, such as those used to finance home mortgages or
automobiles. This cohesiveness helps maintain quick settlements of dis-
putes and avoids lengthy and expensive legal proceedings.Participants in the Development of
Modern RF Banking
It is important to recognize all the wonderful people from different pro-
fessions, with diversified training in many fields, Muslim and non-
232 THE ART OF ISLAMIC BANKING AND FINANCE