IslamicFinance.de

The International Monetary Fund (IMF) has calculated that, if oil prices remain low, the fiscal deficits of the Gulf Cooperation Council (GCC) and Algeria will total almost $900 bn between 2016 and 2021. The non-oil sector in the GCC is projected to grow at an average rate of 3.25% per year over the next five years, compared to an average of 7.75% between 2006 and 2015. Thus, regional governments are being forced to review their expenditure plans. A recent PwC survey found that 75% of the more than 130 owners have already been impacted by funding constraints, while 65% forecast they will have less to spend next year.

#Bahrain-based First Energy Bank (FEB) appointed Khaleefa Butti Omair as the Bank's new chairman, following the recent departure of the Bank's former chairman, Khadem Al Qubaisi. Mr. Khaleefa is a national of the United Arab Emirates with over 13 years experience in investment management. He serves as Chairman and board member of several companies.

The Board of Directors of Al-Khaleej Takaful Group has agreed to increase the company's stake in Qatari Unified Bureau Insurance to 25 % from 20 % at a cost of QAR 6.75 mn. Al-Khaleej Takaful Group reported net profit of QAR 43.38 mn for the year to end-December 2015, down from QAR 74.4 mn a year earlier. Qatari Unified Bureau Insurance is a limited liability company which provides insurance on vehicles entering the country and sells insurance cards for vehicles travelling outside the country.

The head of the Savings and Deposits Insurance Fund said the deadline for the sale of Bank Asya is May 29. If a buyer cannot be found, the bank will be liquidated. The bank started reporting huge losses throughout 2015, while its shares were suspended from trading in Borsa Istanbul. Later it was taken over by the Savings Deposit Insurance Fund. According to the audit report on Bank Asya the bank's shareholders signed blank transfer contracts and a large number of dubious transactions were carried out.

The Islamic Financial Services Board (IFSB) plans to tighten oversight of market practices and revise capital adequacy and disclosure requirements. The new disclosure requirements would cover financial but also sharia-compliance aspects, and may include guidance on specific sukuk formats such as convertible instruments and those used for regulatory-capital purposes. Islamic finance has now systemic importance in 11 countries, these include Qatar, Kuwait, Malaysia, Saudi Arabia and Brunei, with the latest entrant Djibouti. Bahrain and Jordan are close to achieving that status as well.

Turkey wants to set up a new Islamic megabank. Deputy Prime Minister Mehmet Simsek said the prime shareholders would be Turkey's Treasury and the Islamic Development Bank. Simsek prepares for talks with Indonesia in Jakarta next week on proposals to start a Shariah-compliant megabank that will lend to companies and infrastructure projects. Indonesia and Malaysia have long tried separately to establish a Shariah-compliant lender but faced obstacles until now. Turkey is ready to commit more than $300 mn for the lender as capital.

Qatar's Ezdan Holding has priced a $500 mn five-year sukuk issue. The wakala-structured transaction carries a profit rate of 4.375 percent, equivalent to a spread over midswaps of 333 basis points. The reoffer price was 99.446 percent. Barwa Bank, Emirates NBD Capital, HSBC and Mashreq arranged the transaction and were joined by Abu Dhabi Islamic Bank before its close.

Bank Negara Malaysia Governor Datuk Muhammad Ibrahim called on the Islamic finance sector to embrace the financial technological revolution. Technologically-driven applications have spread to every segment of the financial sector, with the number of fintech start-ups having doubled in one year. He noted that the potential impact can be significant, with 10 to 40 % banking revenue possibly at risk by 2025 due to fintech innovations outside banking institutions that are able to offer significant pricing advantage. Bank Negara is reviewing the changes needed to its regulatory framework to ensure that it remains appropriate to manage the risk while encouraging productive innovation.

The Islamic Financial Services Board (IFSB) sees a potential for an increase of sukuk funding in 2016 in line with regulatory reforms in the industry such as Basel III and Guidance Note 6 (GN-6). Secretary-General Jaseem Ahmed said sovereign sukuk sector might gain momentum this year on the back of increased budget deficits, particularly in the energy-exporting countries. He added that Islamic banking assets showed a positive association with oil revenues while the liquidity and profitability of Islamic banks might be adversely affected by low oil prices.

International Islamic Financial Market (IIFM) found that the year 2015 saw a major drop in issuances when only $60.6bn of sukuk were issued, a 43%-slump compared to 2014. A large part of the decline in sukuk issuance was due to the policy decision of Malaysia’s central bank to discontinue the issuance of short-term investment sukuk. Lower sovereign spending in leading Islamic finance jurisdictions continues to take its toll, issuances are not likely to recover in 2016.

Boubyan Bank’s CEO Adel Abdul Wahab Al-Majed said the bank succeeded in covering its capital enhancement sukuk which was oversubscribed by more than 5 times the targeted amount, reaching US$ 1.3 bn. This was achieved during a marketing period of two weeks from the date of obtaining the regulatory approvals from the Capital Markets Authority and the Central Bank of Kuwait. Boubyan Bank issued US$ 250 million sukuk, priced at 100%, which will bear profit at a rate of 6.75%.

Islamic finance is well suited to bridge financing gaps in long-term infrastructure development projects, especially in less developed markets. Deputy finance minister Datuk Johari Abdul Ghani said Islamic financing had huge potential and could meet long-term funding needs since it suited its asset-based and risk-sharing nature. The global Islamic capital market has expanded in size and depth across areas, with a combined market value of over US$21.5tril spread across 70 jurisdictions.

Hong Leong Islamic Bank's CEO Raja Teh Maimunah says the barrier of digitization is the fear of IT security and nervousness of regulators. But fintechs are here and have a high growth potential. The face to face service is an oldschool approach, what matters today is what banks can provide from a technology perspective.

Mohammad Daud Bakar says gold will be a game changer as a commercial asset, investment asset and hedging asset as well. There is now an attempt to put Sharia standard on gold, this will remove the worries of the scholars and regulators. Mohammad Daud Bakar believes the asset classes have to be expanded and Islamic banking shouldn't rely so much on commodities.

Bank Negara is reviewing the changes needed for the adoption of financial technology, or fintech.
As Bank Governor Datuk Muhammad Ibrahim said at the Global Islamic Finance Forum the bank wants to ensure that the regulatory framework remains appropriate to manage the risks, while encouraging productive innovation. Fintech has immense potential in Islamic finance. An estimated 10 to 40 % of overall banking revenues could be at risk by 2025 due to fintech innovations, according to a McKinsey research and CB Insights.

Bahrain-based Al Baraka Banking Group will establish a banking unit in Morocco after receiving approval from local authorities. The bank said entry to the Morocco market would significantly help diversify assets and income sources for the group. In contrast with its peers in the Gulf, Al Baraka has built the bulk of its business outside of the region, including units in Pakistan, Turkey, Egypt, Tunisia and South Africa.

Mehmet Ali Akben, president of the Banking Supervisory and Regulatory Authority (BRSA), said that Bank Asya will either be sold by the end of the month or its license will be canceled. The bank started reporting huge losses throughout 2015, while its shares were suspended from trading in Borsa Istanbul. Later it was taken over by the Savings Deposit Insurance Fund. The BRSA's audit report on Bank Asya said the bank's shareholders signed blank transfer contracts and a large number of dubious transactions were carried out.

The #Bahrain based Al Baraka Banking Group (ABG) announced that it achieved a substantial increase in total operating income of 16%, and net profits before tax and provisions by 13% during the first quarter of 2016. President & CEO Adnan Ahmed Yousif said the group opened 20 new branches in the first quarter of 2016 to bring total branches to 607 branches with total staff of 11,458. Additionaly, ABG obtainied official approval to establish a banking unit in Morocco, which means a higher diversification in assets and income sources for the Group.

According to Standard & Poor’s the profitability of Islamic banks in the Arabian Gulf is likely to deteriorate this year due to the fallout from the price of oil. The 70 per cent drop in oil over the past two years has put pressure on growth prospects and widened deficits across the region. Yet S&P predicts that Sharia-compliant lenders will weather the storm without too much damage because they have capital buffers that include quality assets. Islamic banking assets are continuing to grow at a rate of 16 per cent per year and by 2020, the global Islamic banking industry profit pool is expected to reach $30.3bn.

The Arab Petroleum Investments Corporation announced the completion of an innovative Sharia-compliant financing facility for Algeria’s Oil Recovery Services. The financing was arranged in conjunction with Paris-based oil and gas private equity firm 4D Global Energy Advisors. The initial $10 million financing will act as a template for the financing of several contracts of the company.