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

Abdelilah BELATIK

Secretary General of CIBAFI

Welcome to the 30th issue of the Global Islamic Economics Magazine. We, as usual, provide you with the industry’s updates, and offer expert opinion from thought leaders on a various array of issues.

This month I would like to keep you updated with the CIBAFI activities. CIBAFI, in collaboration with Al Bayan Center for Islamic Finance engineering, has convened the “Sixth Khartoum Forum for Islamic Financial Products Development” with a specific theme on al-Salam contract and its modern applications, on 10 - 11 November 2014 in Khartoum, Sudan. The forum has provided a platform for Sharia and legal experts, economists and financial practitioners in identifying deficiencies in both theoretical and practical applications of Al Salam contract in modern financial system. CIBAFI also signed a Memorandum of Understanding (MOU) with the Emirates Securities and Commodities Authority (SCA) on 18 November 2014 at the Jumeirah Emirates Tower in Dubai, which serves as the foundation for future cooperation towards the enhancement of knowledge sharing and professional development in the Islamic Financial Services Industry (IFSI). Following this initiative, CIBAFI held a Technical Workshop on Islamic Capital Market in the Emirates Securities and Commodities Authority (SCA) on 17 – 19 November 2014, which provided participants with hands on technical knowledge and skills on Islamic Capital Market with a focus on Sukuk and its recent structures compliant with the Basel III capital requirements.

To address the most recent challenges facing the global Islamic finance industry, CIBAFI takes an initiative to convene a CIBAFI In-focus Session as part of the 21st Annual World Islamic Banking Conference (WIBC) on 3 December 2014. The main theme of the In-focus session is “Strategic options for Islamic banks in response to Basel III requirements: Practitioners’ perspective”. The In-Focus session will focus on several key fronts: the alignment between capital management, financing capacity, and business expansion; strategies to cope with liquidity constraints in the Islamic financial industry; the implications on the competitive positioning of Islamic banks within a dual banking system; key areas of improvement in risk governance, infrastructures and strategies; international regulatory arbitrage of Basel III. The Session will bring industry leaders across different regions to share best practices with respect to an appropriate mixture of responsive strategies of Islamic banks in order to maintain performance and growth with the Basel III compliance.

 

The Basel III’s potential implications on Islamic banks has been considered as one of the most critical issues nowadays, especially due to the Basel III being phased around the emerging markets mostly in the year 2015. While Basel III requirements for trading-related counterparty risks will have limited impacts on Islamic banks, some banks have attempted to satisfy the revision of capital definitions and requirements. Over the last two years, three UAE-based Islamic banks, namely, Abu Dhabi Islamic Bank, Dubai Islamic Bank and Al Hilal Bank, have issued Basel III-compliant Tier I mudaraba Sukuk to meet the revised capital standards. On the other hand, in South East Asia, Malaysia is gaining the momentum of this year 2014, with AmIslamic, Hong Leong Islamic, and Maybank Islamic having issued Tier II Sukuk this year. The trend moves further with CIMB Islamic recently preparing its Tier II Sukuk programme to raise up to US$1.58 billion. Bank Islam Malaysia Bhd (BIMB) also has set up a US$ 307 million subordinated murabaha Sukuk. The industry is expecting to have more Basel III compliant Sukuk issuances coming up next year. However, one of the expected challenges in the following years ahead would be the Sukuk structures defined under IFSB-15. Particularly, the Basel III-compliant Sukuk issued so far do not necessarily mean to be IFSB-15 compliant.

Most challenging part of implementing Basel III would be the liquidity requirements, which require banks to hold sufficient high-quality liquid assets (HQLAs). The different weights or run-off rates to funding sources, including profit-sharing investment accounts (PSIA), will be assigned to calculate outflows, which further determine required amount of HQLAs according to the risk level of funding sources. Potential issue is that Islamic banks obtain deposits mostly through PSIA, which have relatively short maturities and are generally considered to be more volatile than conventional deposits. Thereby, Islamic banks are expected to offset the volatility through holding a larger amount of HQLAs. The key solution will depend on the decision of each of the central banks with respect to the treatment of PSIAs, including the adoption of the IFSB-15. On the supply side, theregulators are encouraged to establish the Islamic liquidity infrastructure in their respective jurisdictions in order to strengthen their Islamic banking sector.