In the first part of the article, the authors examine the legal sources of Islamic banking, they also point out its connection with the religious and ethical foundations of Islam. The second part of the article is dedicated to the institutional analysis of Islamic banking. From lens of arbitration decisions the controversial nature of Sharia councils in banks and the multiplicity of approaches to the essence of Islamic banks in different regions of the Islam world are highlighted. In the third part, the authors demonstrate legal difficulties of the implementation of Islamic banking in Egypt.