Fitch Ratings says it expects Turkish Islamic banks' loan growth to remain above the sector average, supported by new entrants to the market and increasing penetration, despite intense competition from conventional banks. Excluding the troubled Bank Asya, Islamic banks (participation banks) expanded their loan books 34% YoY in1H15, compared with sector's average of 25%. For 2016 Fitch forecasts 15%-20% loan growth for the sector. In a report published today, Fitch says return on equity could increase in 2016, underpinned by loan growth, but will be sensitive to non-performing loan (NPL) growth due to the banks' fairly high credit risk profiles and a volatile operating environment.
London-based Cobalt Insurance Holdings Ltd. has announced a strategic investment by Armour Group Holdings Ltd., the Bermuda-based diversified insurance group. Financial considerations were not disclosed. The strategy of Armour focuses on niche operations in the re/insurance and asset management sectors. Armour’s operations include underwriting operations, re/insurance companies, asset management companies and specialist service companies. The investment coincides with additions to the board of Cobalt of former Lloyd’s Chairman Max Taylor as chairman, and Sean Dalton of Armour as a non-executive director. John Turner, chairman of Aon Risk Solutions (UK & Americas), and former Brit Insurance Group CFO Andrew Baddeley also join the board in non-executive capacities.
The City of London yesterday launched a new initiative which aims to cement London's position as a world leader in green finance. The Green Finance Initiative (GFI) will focus on how to mobilize the capital required to implement both the UN's Sustainable Development Goals and the Paris climate change agreement. The unveiling of the new project came as a separate report released by the UN Environment Programme (UNEP) at the GFI launch event highlighted how the UK is currently a global hub in the emerging green finance market. The report, which profiles the actions that have been taken over the past 15 years to incorporate environmental and social factors into the financial sector, argues the UK has evolved a distinctive model of innovation in sustainable finance.
The majority US owned Austrian Bawag PSK starts as first Austrian bank with Islamic Banking. Beginning February a pilot project for a current account starts. Other Austrian banks have so far no plans according to the newspaper Standard. Austria has around 600'000 Muslims.
Bank Asya, which is known for its links to the Gülen Movement, has been fined TL 15 million ($5.14 million) for unpaid taxes. The Finance Ministry's tax authority imposed the fines after examining the bank's accounts for 2010, 2011 and 2012. In May, the BDDK's audit report on Bank Asya revealed that the bank's privileged shareholders signed blank transfer contracts and a large number of shady transactions were carried out. After 63 percent of stakes belonging to the bank's A group shareholders were transferred to the TMSF in February, the BDDK launched an investigation into the bank, finding a number of dubious transactions in investigations. In addition, the international credit rating agency Fitch said in June that Turkey's banking sector would not be significantly affected by the takeover of Bank Asya.
On December 15, 2015, the Prime Ministry of the Republic of Turkey issued a circular on the formation of an Islamic Finance Coordination Committee (Faizsiz Finans Koordinasyon Kurulu) to accelerate the development of Turkey's Islamic finance markets. The Islamic Finance Coordination Committee will be chaired by the minister responsible for the Undersecretariat of Treasury and will include top financial markets regulators from the Ministry of Development, the Ministry of Finance, the Central Bank, the Banking Regulation and Supervision Authority, the Capital Markets Board, Borsa Istanbul, and the Islamic Banks Association of Turkey. The Islamic Finance Coordination Committee will also consult with non-governmental organizations, academics and professional organizations.
Turkey is likely to loosen some regulations on domestic banks to spur lending, Huseyin Aydin, the head of the national banking association said, as the government looks to ease the impact of a widely expected central bank rate increase. The government is determined to pursue growth-oriented economic policies. It is expected that easing in macro-prudential measures will be carried out. Five years ago regulators introduced tighter rules designed to cool lending and close a yawning current account deficit. Those included higher reserve requirements, forcing banks to hold more capital.
Aydin said he expects changes to regulations on reserve requirements and risk weighting of assets, which should help to offset the impact of tighter monetary policy on bank costs.
Keith Leach, chief commercial officer (CCO), Al Rayan Bank, has an answer to the question if the new UK stamp duty charges announced in the autumn budget have a negative impact on foreign investment into property. His answer showed that potential investors are looking at the big, global picture. The tax changes — what might be on the horizon — wasn’t figuring in their thought processes. What was in their thoughts was the political and economic instability in the region, he explained. With regard to the impact of the 3% hike across all bands of stamp duty on buy-to-let landlords in the UK, Leach said it could lead to landlords faced with higher charges raising rents, or abandoning the buy-to-let market with a consequent reduction in availability of rental properties.
Islamic International Rating Agency (IIRA) has reaffirmed the ratings of Kuveyt Turk Participation Bank (KTPB) at ‘AA(tr)/A1+(tr)’ (Double A / A One Plus) on the national scale. Ratings on the international scale have also been reaffirmed, with foreign currency rating at ‘BBB-/A3’ (Triple B Minus / A Three) and the local currency rating at ‘BBB/A3’ (Triple B / A Three). Outlook on the assigned ratings is ‘Stable’. The assigned ratings take into account KTPB’s sound financial risk profile, against the backdrop of continued business expansion. Overall profitability position is also healthy; however, efficiency indicators have lagged behind larger players.
The gap between the spending needs of developing countries and the pressure on financial institutions to carefully monitor their credit exposure in order to optimize their capital management driven by regulatory constraints on solvency, is creating opportunities for more diversified products of alternative funding. Considering promoting the Islamic bond market is on top of the agenda of credit risk management, thus creating room and greater opportunities of growth for Islamic products of asset based or backed instruments. This context provided the background for the Deloitte and IRTI-IDB Group executive workshop, “The corporate Sukuk market in Europe: mapping the pathway for an alternative financing”, recently held in London.
Speaking at a conference about UK’s general insurance in London, Max Taylor, chairman of the Islamic Insurance Association of London, said that the success of the takaful model relied on the participation of policy holders as the actions of one have an affect on all policy holders. There have been many attempts to establish takaful insurance operations in the UK in the past, but he said projects failed because of issues with capitalisation, underwriting approaches, and investment strategies under Shariah principles. He added that, internationally, takaful models had been successful in personal lines, but the vast majority of operators of such models were “small” and “risk averse”.
The Bank of England has joined the Islamic Financial Services Board (IFSB), the second Western regulator to do so after Luxembourg. The BoE joins as an associate member, the 65th regulatory body to join the Kuala Lumpur-based body, bringing total membership to 189, the IFSB said in a statement. The move comes at a key time for Britain’s domestic Islamic banks, as the BoE works to grow the number of sharia-compliant assets they can use in their liquidity buffers, with progress expected by the turn of the year. The IFSB has also admitted the central bank of Kyrgyzstan and the Securities and Exchange Commission of Pakistan as observer members.
Bahrain-based Tadhamon Capital announced the successful exit from its investment in Coxlease School in Lyndhurst, Hampshire, UK. The school is a specialist residential education facility for children with severe behavioural, emotional and social difficulties. It is let to Priory Group for a 30-year period with annual rent reviews linked to the retail price index. Acquired in November 2010, the school was Tadhamon’s seed investment in its Social Infrastructure Investment Platform in the UK. The platform currently holds assets valued at more than $523 million across segments. Over the five-year investment period, a minimum annual cash dividend of nine per cent was achieved.
The Wall Street Journal (WSJ), in continuing to pursue the story on the 1MDB controversy, has reported that there’s unprecedented attention on a number of Swiss banks and Zurich-based Falcon Private Bank AG, a small wealth manager snapped up by an Abu Dhabi investor during the financial crisis. The Swiss authorities, according to WSJ, are probing suspected money laundering and possible corruption of “foreign officials”. The investigations have landed Falcon in the middle of the controversy around 1MDB. Falcon, which so far hasn’t been accused of any wrongdoing, said the bank was legally barred from answering questions about its clients.
Qatar's Barwa Bank has listed a $2 billion Islamic bonds programme on the Irish Stock Exchange, taking the lender a step closer to tapping the sukuk market for the first time. Rating agencies Moody's and Fitch assigned ratings of A2 and A+ respectively to the sukuk programme. Barwa Bank hasn't specified a timeframe or size for its potential debut deal. Barwa is classified as a systemically important bank, with 53 percent of its share capital owned by the Qatari government through Qatari Holding LLC and other government funds. Barwa's sukuk programme uses an agency-based structure known as wakala. The transaction is being arranged by Citigroup.
The collapse in the price of oil has compounded the problems for Aberdeen Asset Management, with Europe’s third-largest listed fund house reporting its 10th consecutive quarter of net fund outflows. The Scottish-based asset manager has been battling with investor nervousness over the continued turmoil in its core regions, but net redemptions have been exacerbated by oil-producing countries pulling money from their wealth funds to make up for a loss of export earnings. Aberdeen suffered net outflows of almost £13bn during the three months to the end of September. So far this year, the Saudi Arabian Monetary Agency — the world’s third-largest sovereign fund with $661bn invested — has withdrawn about $70bn from external asset managers to support its economy.
European Islamic Investment Bank PLC on Friday said it has changed its name to Rasmala PLC, effective immediately. The company said it would make a further announcement on the subject before the end of the year.
BLME Holdings has appointed James Harrowsmith as a director to the BLME leasing team. He will report to Fred Yue, head of leasing at BLME and will be responsible for leading the bank’s heavy goods and commercial vehicles funding business.
Harrowsmith has over 20 years of experience in financial services, specialising in asset finance to the commercial vehicles sector. He was most recently at Eddie Stobart where he was responsible for sourcing all of the business funding solutions for its fleet of 2,500 HGVS and 3,000 trailers.
Prior to this, he was at Close Brothers Asset Finance and also HBOS, specialising in the HGV and LCV sector and was part of a team managing a £2 billion portfolio of assets.
The Waqf Fund, a Bahrain-based special fund to support Islamic finance training, education and research, hosted its tenth Sharia Scholar session with Dr. Abdulbari Mash'al. Dr. Mashal made a presentation on "What Sharia Reviewers can do to enhance Sharia governance and compliance at Islamic banks". This was followed by an interactive two hour session during which the participants asked questions and gave their comments. Dr. Mash'al explained the general internal Sharia control environment of an Islamic bank and then focused on governance and Sharia compliance. He also explained the interplay between internal Sharia compliance and internal Sharia audit. Dr. Mash'al explained how inherent risks pass through the protection pillar or filter of internal Sharia supervision and the Sharia non-compliance risk is subjected to internal Sharia audit procedures to reduce the likelihood of such risks occurring. If the process is robust it will substantially reduce Sharia non-compliance risk. He emphasized that in order to be effective the internal Sharia auditor has to demonstrate independence and objectivity, technical competence and due care.
Islamic finance is based on growth of assets, not financial engineering, and this organic growth makes it different from Western debt constructs, Justice and Development (AK) Party parliamentarian and economist has said.
Ibrahim Turhan, member of Turkish parliament for AK Party from Izmir, made the remarks in an interview with Anadolu Agency on the sidelines of the Second International Islamic Finance and Economics conference in Istanbul on Thursday.
Turhan, who is also an economist and former chief executive officer of Borsa Istanbul, said: “One of the principal causes of financial crisis of 2008-2009 was the vast market that had grown up for securitized instruments.