العدد الحالي: ايلول/ سبتمبر 2018       اختر عدد :
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كلمة المجلس العام

Abdelilah BELATIK

Secretary General of CIBAFI

Welcome to the 63rd edition of the Global Islamic Economics Magazine (GIEM).  As always, it is our pleasure to keep you updated with current challenges and prospects in the global Islamic financial services industry (IFSI). The GIEM also serves as the platform for CIBAFI to keep our stakeholders informed about our activities and key initiatives.

Aligned with its role as advocate of IFSI, and as part of CIBAFI’s Strategic Objective of Policy and Regulatory Advocacy, CIBAFI provided its comments to the Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI) on latter’s Exposure Draft (ED) on Auditing Standard for Islamic Financial Institutions No. 6: External Shariah Audit (Independent Assurance Engagement on an Islamic Financial Institution’s Compliance with Shariah Principles and Rules). The ED was issued on 20th June 2017 for public consultation until 15th August 2017. Full comments to the AAOIFI exposure draft are available on CIBAFI website.

The use of London Interbank Offered Rate (LIBOR) has been widespread for the purpose of benchmarking of more than US$350 trillion financial products globally, including home loans to credit cards and other financial products. LIBOR which is also used by Islamic financial industry to benchmark its products has been hit by many scandals (latest in 2012) for manipulating the rate, in addition to claims of ineffectiveness of LIBOR due to the number and volume of interbank transactions which form the basis to determine this rate. In a recent development United Kingdom’s Financial Conduct Authority, which regulates LIBOR, said that it plans a transition from LIBOR to more effective and alternative benchmark/s by the end of year 2021. The sterling overnight index average (Sonia) which reflects UK banks’ and building societies’ overnight funding rates in sterling is seen, among others, as an alternative. The moving away from LIBOR will also affect Islamic financial market in terms of benchmarking returns of Islamic banks’ transactions, Islamic money market and Islamic capital market instruments.

The proposed discontinuation of LIBOR can be considered as an opportunity by the Islamic financial industry to take timely steps to construct their own benchmark rate with consensus across Islamic finance jurisdictions and its stakeholders. In 2011, a group of Islamic banks attempted to construct an index that represented rates on interbank funding for Islamic financial industry. These banks together with an industry data provider created an industry reference rate called Islamic Interbank Benchmark rate (IIBR). The phasing out of LIBOR may be a beginning to revive similar attempt in having an independent Islamic index which can be used widely by Islamic finance markets and encourage adoption of Shariah-compliant indexes rather than interest-based ones.

As emphasised last month, as Sukuk market continues to evolve and broaden its appeal to newer jurisdictions, its regulation, governance, and legal robustness are increasingly becoming crucial areas of focus. There is an increasing need for Islamic financial industry’s stakeholders, including the standard setting bodies, financial institutions, rating agencies, etc. to partake in building a reliable infrastructure and bring awareness and promote information sharing platforms.

Recent GCC sovereign downgrades have affected the economies of the region, and therefore importance of rating agencies cannot be undermined while Islamic financial industry continues to contribute to the regions profitability and growth. CIBAFI as major stakeholder has a mandate to enhance capacity building in the Islamic Financial Services Industry (IFSI) and bring specific awareness on subjects such as ratings of Islamic banks and Islamic capital market instruments. Accordingly, CIBAFI, as part of its third Strategic Objective, in cooperation with S&P Global Ratings, and under the patronage of the Central Bank of Bahrain (CBB) is organising a Seminar on Credit Ratings, with special focus on Islamic Banks and Sukuk Ratings Methodology in Manama, Kingdom of Bahrain on 17 – 18 September 2017.

The Seminar will provide an opportunity to engage in the process, methodology, and outcomes of credit ratings, and to understand the role of credit rating agencies in assessing the creditworthiness of sovereigns, Islamic banks, and Islamic financial market instruments.

As part of CIBAFI’s fourth Strategic Objective of Professional Development, CIBAFI will organise the third series of join Executive Programmes for C- suit Executives on 7 - 8 November 2017 in Manama, Kingdom of Bahrain. The programme will be held in collaboration with Ivey Business School following successful execution of the two joint Executive Programmes in 2015 and 2016. The programme will deliver a world class and highly interactive learning experience for Islamic Financial Institutions’ (IFIs) Executives in the area of strategic thinking, corporate entrepreneurship, and leadership development.

CIBAFI will continue to highlight and help address important industry issues as part of its role to promote awareness and information sharing and develop the Islamic finance industry to ensure its continued progress. Stay tuned!