INTERVIEW: Economist urges top Islamic finance body to cut risks

Tariqullah Khan, a prominent economist in Islamic finance, has called for the creation of an "apex body" that would set policy for the industry globally, to cut risks that could contribute to a financial crisis. The professor of Islamic finance at Qatar's Hamad bin Khalifa University proposed the body comprising national regulators, central bankers and other stakeholders. It would help to promote the standards of the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Malaysia-based Islamic Financial Services Board (IFSB).

Malaysia aims to boost Islamic finance with new initiatives in budget

The Malaysian government announced the new incentives for "ethical" Islamic bonds in the 2016 budget which was delivered by Prime Minister Najib Razak. The government originally introduced the concept of "ethical" sukuk to finance "sustainable and responsible investment" (SRI) in 2013. Sovereign wealth fund Khazanah sold 100 million ringgit ($23.7 million) of SRI sukuk in May this year but so far there have been no other issues. In Friday's budget, Najib said Malaysia would cut taxes on issuance costs of SRI sukuk, and also that sharia-compliant loan instruments would be given a 20 percent stamp duty exemption in certain cases.

EXCLUSIVE-Saudi CMA may relax investor rules to join world indices

Saudi Arabia would be open to relaxing its rules on foreigners investing directly in its stock market to help it get included in global indices, the chairman of the Saudi financial-markets regulatory agency, the Capital Market Authority, said. In his first interview with international media since his appointment in January, Mohammed al-Jadaan also defended the limited trading so far by qualified foreign investors (QFIs) and noted the kingdom was already seeing wider benefits from having direct foreign access to its $470 billion stock market. On June 15, the Saudi stock exchange, the Tadawul, became one of the last major emerging markets to let foreigners buy shares directly.

Bitcoin is becoming the single common currency of cyber criminals, says Europol

Bitcoin may be becoming the single common currency used by cyber criminals across the European Union, said Europol. In its 2015 internet organised crime threat assessment, it warned about, among other things, money muling and laundering services that required concerted and coordinated international law enforcement action, and that Bitcoin was featuring heavily in many EU law enforcement investigations. Although there is no single common currency used by cybercriminals across the EU, it is apparent that Bitcoin may gradually be taking on that role.

Offshore tax zones cost developing countries $100 billion yearly, says OECD

Developing countries are losing around $100 billion a year in revenues because foreign investors are channelling profits through offshore zones to avoid tax, a study by U.N. think-tank UNCTAD said on Wednesday. The economic and trade body published the $100 billion figure in its annual World Investment Report, which analyses how much foreign direct investment (FDI) is flowing across borders in search of corporate takeovers and start-up ventures. It calculated the amount by applying an average tax rate of just over 20 percent to around $450 billion of corporate profits shifted out of developing economies every year.

Yield-starved investors driving asset prices to dangerous levels, says OECD

Encouraged by years of central bank easing, investors are ploughing too much cash into unproductive and increasingly speculative investments while shunning businesses building economic growth, the OECD warned on Wednesday. In its first Business and Finance Outlook, the Organisation for Economic Cooperation and Development highlighted a growing divergence between investors rushing into ever riskier assets while companies remain too risk-averse to make investments. It urged regulators to keep a close eye on investors as they piled into leveraged hedge funds and private equity and poured cash into illiquid assets like high-yield corporate bonds.

Saudi market regulator studying REIT listing rules - sources

Saudi Arabia's Capital Market Authority (CMA) is studying plans to introduce rules governing the listing of real estate investment trusts (REITs). The regulator has approached market participants in recent weeks about forming a panel which will report to it on areas including how REITs work in international markets. The CMA was not available to comment. Given the early stage of the plans and the slow pace of regulatory progress in the kingdom, it is likely to take some time to draw up even draft rules for REITs, securities which trade on stock markets but which invest directly in properties and distribute profits as dividends.

Morocco issues decree to create sharia board for Islamic finance

Morocco has issued a royal decree to create a sharia board of Islamic scholars to oversee the country's fledgling Islamic finance industry. Called the Sharia Committee for Participative Finances, it will be composed of 10 Islamic scholars and financial experts, the country's official bulletin said. The members of the committee will be named by the president of the country's Islamic scholars council. The board will approve the conformity of the Islamic products proposed by the participative banks, as they will be known under the legislation, and insurance (takaful) to sharia law. It will also oversee the central bank decisions regarding the participative finances sector.

Bahrain to develop central Sharia board for Islamic banks

Bahrain's central bank is setting up a central sharia board to help oversee Islamic finance products in the kingdom and will introduce new rules to strengthen governance in the sector, central bank governor Rasheed al-Maraj said. Traditionally, Islamic banks have practiced self regulation to ensure the sharia-compliance of their products, but a centralised model is increasingly being favoured across the global industry. The central bank will introduce new sharia governance rules to expand the internal sharia review and audit functions, while making it mandatory for banks to have an independent external sharia audit.

Islamic finance body IIFM to develop trade, corporate finance contracts

The Bahrain-based International Islamic Financial Market (IIFM) will develop contract templates for sharia-compliant corporate finance and trade finance transactions, as the industry body expands its mandate. IIFM is aiming to double the number of its standards by as early as next year. The new standards would help broaden the scope of IIFM, as the body works to harmonise industry practices, said Khalid Hamad, executive director of banking supervision at Bahrain's central bank and IIFM chairman. Trade finance has remained a marginal business for Islamic banks even as other areas have boomed in recent years, partly because of a lack of scale and expertise compared to larger and more established Western banks.

Malaysian prime minister backs idea of creating Islamic mega bank

Malaysia's Prime Minister Najib Razak said that he backed the idea of creating a large stand-alone Islamic bank, in order to develop a global footprint for Islamic finance and position it as an alternative to conventional banking. A proposed merger between Malaysia's CIMB Group Holdings Bhd and two smaller peers would create a sharia-compliant bank with the financial clout and regional scope that has so far been absent in the industry. Such consolidation would be positive for Malaysia's banking sector, although the government will not press for a deal and will leave the decision entirely up to the shareholders, Razak said.

New UAE rules aim to develop local currency bond, sukuk markets

New rules issued by the United Arab Emirates' securities market regulator aim to develop local currency bond and sukuk markets in the Arab world's second biggest economy. In meetings with potential issuers and financial firms in Abu Dhabi and Dubai this week, the Securities and Commodities Authority (SCA) outlined rules designed to make it faster and cheaper for companies to issue conventional and Islamic bonds, and easier for investors to trade them. If successful, the project could help to reshape corporate financing in the UAE. At present, firms rely heavily on bank loans and to a lesser extent retained earnings; local currency bond issuance is minimal, and usually only the biggest companies can afford to issue bonds in the international market.

Islamic pensions make inroads among asset managers

Islamic pensions are making inroads in several majority-Muslim countries, and their success may help the growth of asset management industries across much of Asia and the Middle East. Most pension plans around the world are state-funded. But many countries are trying to develop private pension sectors as a way to deepen their financial markets, and Islamic finance can become a significant part of this effort. If state-owned pensions in major Islamic markets shifted a portion of their money into sharia-compliant schemes, that could add between $160 billion and $190 billion to the sector. Pakistan for example created a voluntary pension system (VPS) in 2005 which now holds 3.4 billion rupees

Politics and law weigh on Islamic finance in India

Islamic finance in India is strongly limited by the country's ban on sharia-compliant banking. However, the industry intends to create a work-around by developing specific products that can take this function. Due to the political and legal obstacles any progress is expected to be rather slow. Meanwhile, 177 million Muslims in India, which constitute the world's largest Muslim minority population, have no access to Islamic banking since laws covering the sector require banking to be based on interest, which is not allowed in Islam.

Islamic banks to expand, compete for mainstream clients, says study

It is expected that Islamic banks will expand further since they are currently competing more and more with conventional lenders in attracting mainstream customers. The Islamic assets of all commercial banks' in total are estimated to reach $1.55 trillion this year, $1.8 trillion in 2013 and over $2 trillion mark. Nearly 30% of the total - $450 billion in assets - are owned by Islamic banks in the Gulf region.

Qatar approves law establishing single regulator

Qatar's emir has eventually given his approval to the regulatory reform which is expected to simplify the slow and complex process of doing business in the country. However, no timetable for the completion of a reform first mooted five years ago was given. According to a central bank spokesman, the law ensures an umbrella body which will regulate banks, financial services and insurance companies and the country's bourse as well as banking, financial and insurance companies licensed by the Qatar Financial Center.

Gulf banks go overseas to satisfy new funding rules

Banks of the Gulf region are poised to raise billions of dirhams of fresh funds in order to meet the impending funding rules. The deadline for the first set of new Central Bank liquidity regulations at the end of the year is approaching.

MENA Private Equity Association and Hawkamah focus on advancing corporate governance

MENA Private Equity Association will collaborate with the Hawkamah Institute for Corporate Governance in order to advancing corporate governance within the Private Equity sector. The main scope of the cooperation should be to re-assess the current governance practices in the private equity industry and to draw up a policy brief.

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