Islamic banks: trouble beneath calm waters?

As Western regulators stress test top banks, Islamic finance wants to broaden its regulatory approach and improve disclosure rules amid concerns that unhealthy banks may have slipped under the radar.

Few Islamic financial firms have reported headline-grabbing losses so far, but the industry's relatively modest size and opaque framework could mask more trouble than appearances suggest, bankers and lawyers say.

Rather than stress testing individual banks as in the United States, however, Islamic bankers and lawyers say the sector needs better disclosure rules within stronger regulatory frameworks.