An opportunity for Labuan Islamic banks had strengthened the capitalisation and liquidity management that show by Basel III. Labuan Islamic banks had given good impact from the transaction book commerce like Shariah principles. For capital adequacy position, the purpose for the Shariah principle is to forbid short selling and carry out severe limitations on the use of derivatives. Thus, Labuan Islamic Bank will be not importantly impacted by the higher capital charges. On the others hand, the limitation use of derivatives structures by Labuan Islamic banks will result not harmfully impacted by the additional capital charges. There are being useful to report the inherent risks in some products. The lack of leverage and contingent risks is well for Labuan Islamic banks until now as the new leverage ratio and not likely to have anything more than the ordinary impact. While, for the liquidity management is to be expected impact to a meaningful extent. Even though the development expands of Labuan Islamic liquidity markets, there is lack of experienced liquidity instruments and central bank facilities. For example is the increased Sukuk issuance by the ‘AAA’ rated IDB. However, Labuan Islamic banking’s limitation will offset the related lack…show more content… Besides that, Basel 2.5 had raises regulatory capital requirement on traded market risk to a more appropriate level. On the other hand, Basel II impact on the equity of Islamic bank that must interpreted to include the equity of shareholders and the equity of the owners of unrestricted deposit, this is because the latter carry their share of the risk of losses by virtual of the Mudarabah contract. In additional, the portion of operational risks minimum capital charges to shareholders in Islamic Banks is apparently low. This means that the capital burden on shareholder should be low as