This was the consensus of the distinguished speakers at the first day of the 9th IFSB Summit themed as “Global Financial Reforms: The Changing Regulatory Model and Islamic Finance” that is hosted by the Central Bank of the Republic of Turkey. (source)
In the opening session, the speakers included H.E. Dr. Erdem Basci, Governor, Central Bank of the Republic of Turkey; Jaseem Ahmed, Secretary General of the IFSB; H.E. Dr. Mahmoud Mohieldin, Managing Director of the World Bank and H.E. Dr. Cevdet Yilmaz, Minister of Development of the Republic of Turkey. The distinguished speakers highlighted that the intrinsic strengths of Islamic financial services industry, if fully explored, can help build a robust, resilient and just financial system that not only supports economic growth but also ascertains broad based distribution of economic gains. There is a need for a strong regulatory oversight for Islamic financial services industry and related capacity building. Further, in the backdrop of the current emphasis on macroprudential supervision, insolvency and resolution regimes should be strengthened with cross-sector and cross-border collaboration between supervisors. Looking at the perils facing the global financial system, it can be observed that a financial system that is divorced from the real sector will prove to be more vulnerable to systemic shocks. Noting the inbuilt strengths of Islamic finance, it was emphasised that Islamic financial products are not meant for addressing the needs of Muslim-majority nations only, but have the potential to address the financial needs of all communities.
The first session themed as “International Regulatory Initiatives to Enhance Global Financial Stability”
was chaired by H.E. Sultan bin Nasser Al Suwaidi, Governor, Central
Bank of the UAE. The speakers in the session included H.E. Yaseen Anwar,
Governor, State Bank of Pakistan; William Coen, Deputy Secretary
General, the Basel Committee on Banking Supervision; Prof. Necdet
Şensoy, Board Member, Central Bank of the Republic of Turkey and Dr.
Ghiath Shabsigh, Assistant Director, Monetary & Capital Market
Department, the International Monetary Fund. However, better
coordination of supervisors and Shari`āh supervisory boards is
required to address corporate governance, liquidity and capital adequacy
issues facing the industry. The speakers cautioned the delegates that
new global initiatives for financial sector reform try to provide some
capital cushion to financial institutions in the times of turbulence;
nevertheless, they fall short of offering a remedy to the problems
facing the global financial system. Islamic finance has the potential to
become this remedy. Commending the approach taken by recently issued
IFSB Guiding Principles on Liquidity Risk Management (IFSB-12); it was
observed that compliance with this standard can help the IIFS in better
management of their liquidity risk. There is also a scope for enhanced
cooperation between conventional and Islamic banks for the mutual
benefit of the financial sector e.g. countercyclical nature of many
Islamic products can help the conventional financial institutions in
development of products and instruments with similar features.
The second session themed as “Impact of International Regulatory Initiatives on the Islamic Financial Services Industry”
was chaired by H.E. Dr. Jihad Al Wazir, Governor, Palestine Monetary
Authority. The speakers in the session included Baljeet Kaur Grewal,
Managing Director and Vice Chairman of KFH Research Ltd, Malayisa: Sabri
Ulus, International Director, Fajr Capital, United Arab Emirates and
Abayomi Alawode, Manager, Financial Systems Global Practice, The World
Bank. While appreciating the strengths of Islamic finance, the speakers
in this session called for more cooperation between the IFSB and other
global standard setting bodies such as the Basel Committee. Similarly
there is a need to increase the collaborative efforts between
supervisory authority with regard to legal, regulatory, taxations and
accounting issues. The need for harmonising Shari`āh governance
framework in the jurisdictions was also highlighted during the session.
In order to address the pressing liquidity management issues,
development of domestic market for Shari`āh compliant instruments
is imperative. Simultaneously, key stakeholders need to work on
increasing the awareness of businesses and entrepreneurs and the general
public at large.
The third and last session on the first day was themed as “Regulatory Harmonisation and Cross-border Linkages in Islamic Finance”.
This session was chaired by Dr. Ibrahim M. Turhan, Chairman and Chief
Executive Officer, Istanbul Stock Exchange, Turkey. Among the speakers
included Mr. Hooman Sabeti-Rahmati, General Counsel, International
Islamic Liquidity Management Corporation; Professor Dr. Volker Nienhaus,
Visiting Professor, University of Reading, United Kingdom and Associate
Professor Dr. Servet Bayindir, Faculty of Theology, Istanbul
University, Turkey. The speakers deliberated on the current work being
undertaken by the International Islamic Liquidity Management Corporation
(IILM) and expected that the issuance of Sukūk by IILM will contribute to regulatory harmonisation and enhance cross-border linkages. The speakers expected that the IILM Sukūk will not only contribute to the harmonisation of Sukūk
issuance across borders and strengthen cross-border linkages but also
build market infrastructure by issuance through primary dealers in
various jurisdictions. The speakers also raised the concern on
regulatory diversity in the Islamic finance landscape and proposed
various measures to reduce the supervisory and Shari`āh segmentation in the industry. It was proposed that in the absence of Shari`āh
compliant deposit guarantees for profit sharing investment accounts and
the smoothing practices of the markets players, it should be ensured
that capital requirements on Islamic banks remain vigorous. The Shari`āh
governance issues facing various jurisdictions were also highlighted by
various speakers who reiterated the importance of compliance with
IFSB’s Shari`āh governance standard.
For more details on the 9th IFSB Summit and pre-Summit events, please visit www.ifsbistanbul2012.com or email yazmin@ifsb.org
Source; http://www.ifsb.org/preess_full.php?id=194&submit=more - May 17, 2012
