London : Regulators need to encourage "small" Islamic banks to merge to strengthen their finances and increase product offerings, a senior adviser at Bank of London and Middle East said.
"Small and new banks tend to target the market of older and bigger banks, which fragments the market rather than diversifying or broadening the Islamic offering," Mahmoud Faruqui said in an e-mail on March 25.
"The small capital base of Islamic banks in absolute terms is not enough to allocate high resources for investment in technology and human capital," he said.
Basel II, an international standard that calls for banks to have adequate capital reserves, and pressures for change across the industry will compel regulators to encourage smaller Islamic banks to merge, he said.
