AlUla unveils new experiences and opens bookings    KSRelief launches medical campaigns to combat blindness in Sudan, Nigeria    Arab Parliament expresses concern over Yemen due to Houthi militia's violations    UK's Labour Party suspends former leader Jeremy Corbyn after anti-Semitism report    US and more Arab allies denounce Houthi attacks against Saudi Arabia    SFA unveils third edition of ‘Step Together' challenge to observe World Diabetes Day    UN strongly condemns knife attack in French city of Nice    India seeks global energy industry partnerships    "SAMA": Mortgages loans reached 208,505 Contracts until Q3 of 2020    At least 140 Dead After Migrant Vessel Sinks off Senegalese Coast    Japan's Total Coronavirus Cases Top 100,000    Kuwait Condemns Nice Attack as Brutal Terrorist Crime    Etihad Airways becomes first airline to issue sustainability-linked sukuk    Police of Makkah Region: Arrest of a citizen who attacked a security guard at the French Consulate in Jeddah using a sharp tool    Abeer Olayan Petroleum and gas expert    KSRelief launches a new voluntary medical campaign in Sudan    Rector of King Khalid University receives Swedish Ambassador    Saudi Press: Saudi Arabia allocates SR 500,000 for each family of health practitioners who died of COVID-19    Weather Forecast for Thursday    Bahrain's king receives US defense secretary, lauds strong bilateral ties    KSRelief delivers civil defense machinery to Palestinian govt    KAUST – the fancy city    Maisuria: Warmups, conditioning and rest key to successful return    14-year-old Dubai-based amateur secures invite to ODMC    26 countries pay musical tribute to coronavirus frontline heroes    A new era in architecture where future details design AlUla's past Nouvel describes UNESCO site as ‘The coming together of a landscape and history'    Saudi Stock Exchange Main Index Ends Trading, higher, at 8,198.9 Points    Qur'an recitation competition for children organized    Ministry of Commerce Highlights Saudi Arabia's Endeavors to Implement Guiding Principles Protecting Consumers, at UN Forum    Bahrain's top Islamic body condemns attempts to insult Muslim symbols    Saudi Stock Exchange Main Index Ends Trading Higher, at 8,155.31 Points    Bestselling global literary icons will lead cultural program at SIBF 2020    Plan to make vaccinations compulsory for birth certificate    MoH Marks World Osteoporosis Day 2020    Saudi man accused of harassing foreign wife asked to be produced before court Court allows divorce, custody of children by mother    Man United, Liverpool in talks to join new European super league    KSrelief, IMC, Sign Memorandum of Cooperation    Napoli blast four goals as they thumped Atlanta 4-1    VAR foils Liverpool in derby draw with Everton    MoH Calls on Groups of Patients to Postpone Umrah Performance    Ithra to Launch 3rd Creativity Season (Tanween)    Red Sea International Film Festival Announces a New Short Film Competition    S. P. Bala, legendary Indian singer, dead at 74    Happy National Day 90    Eid Al-Adha Prayer Performed at the Grand Holy Mosque    Pilgrims Perform Dhuhr and Asr Prayers in Arafat Holy Site    Senior Scholars Council Issues Decision No. 246 Regarding Attendance of Friday Prayer and Prayers at Mosques in a Case of Spread of Epidemic or Fear of its Spread    Custodian of the Two Holy Mosques Addresses Citizens and Muslims on Eid Al-Fitr    

Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.

Central bankers form body to manage Islamic liquidity
Published in The Saudi Gazette on 29 - 10 - 2010

KUALA LUMPUR: Eleven central banks and two multilateral organizations established the International Islamic Liquidity Management Corporation to absorb excess liquidity and facilitate greater investment flows within the Islamic financial services industry.
Taking advantage of the international audience at this year's Global Islamic Finance Forum (GIFF) in Kuala Lumpur, Bank Negara Monday hosted the launch of the International Islamic Liquidity Management Corporation (IILM).
Signatories of the IILM are governors and their representatives from the central banks and monetary authorities of Indonesia, Iran, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Saudi Arabia, Sudan, Turkey and the United Arab Emirates. The Islamic Development Bank and the Islamic Corporation for the Development of the Private Sector are the multilateral organizations participating in the initiative.
The IILM initiative was facilitated by the Council of the Islamic Financial Services Board.
“It is our hope that the establishment of this new entity in the Islamic financial services industry will support the ongoing efforts by the central banks and the monetary authorities to enhance the efficiency of institutions offering Islamic financing services in managing their liquidity.” professor Datuk Rifaat Ahmed Abdel Karim, said at the signing ceremony.
A memorandum of participation for the IILM was signed Wednesday on the sidelines of the IMF-World Bank annual meetings in Washington. The signing of the articles of agreement Monday marks the official establishment of the IILM.
Although driven by Malaysia, this is a collaboration of 11 central banks from across the world, including Bank Negara, and two multilateral organizations.
The corporation's aim is to assist institutions offering Islamic financial services in addressing their liquidity management in what was described as “an efficient and effective manner”. The initiative is expected to facilitate greater investment flows for the Islamic financial services industry.
Once it is fully operational, the IILM is expected to issue high-quality Shariah-compliant financial instruments for both national implementation and cross-border. However, as a number of specialists noted at this year's GIFF, before any issuance can take place, there needs to be a broader consensus reached on global standards.
This is another issue entirely, and one which has been debated and bantered among practitioners and academics since the development of global Islamic financial markets. However, of more immediate interest at the GIFF - prompted by the launch of the IILM - was finding solutions for the long-standing problem of liquidity management.
“The issue of liquidity is alien to Islamic finance,” voiced Rafe Haneef, managing director of global markets at HSBC Amanah. “According to Islamic law it is supposed to be liquidity neutral,” he said.
However, with the rate of growth in the market, there is a large amount of liquidity accumulating - a situation at odds with how Islamic finance ought to be practiced in theory. Therefore, there is an increasing need for Islamic financial institutions to find banks with larger capital bases that are able to consume the counterparty limits required to support this growth.
“The Islamic banking system is still small and hence it is not able to absorb all the liquidity in the Islamic banking markets,” Haneef said.
The idea is that IILM will absorb some of this excess liquidity in the future, but how that is to be done is still very much a work in progress.
“We have not seen a situation where there has been a serious crisis hitting the Islamic finance market and this poses a lot of risk,” expressed Kamarul Ariffin Mohd Jamil, chief executive officer of Affin Islamic Bank.
More importantly, how to regulate this from an asset liability perspective and a liquidity management perspective is far from being defined. Whether this would be a task for the IILM is still unclear as the lines between local jurisdiction and cross-border cooperation remain unclear.
A part of this lack of clarity can be attributed to the incongruity of each country's development in relation to one another, which means they will have a different emphasis in their respective agendas. Where many are calling for a common approach to taxation of Islamic products, other jurisdictions, for example Saudi Arabia, are addressing consistency elsewhere.
Damian White, general manager for the treasury group at Al Rajhi Banking and Investment Corporation (Saudi Arabia), believes that part of the overall liquidity management equation is issuing term debt.
“Individually the banks need to focus on getting the treasury products approved,” he said. “Islamic retail banking in the Kingdom is very advanced and corporate banking is developing, but treasury is lagging behind and if we can't address the issues, Islamic banking will struggle to go to the next level.”
The issues mentioned by White, Haneef and other Islamic finance specialists have been debated for years. “The issues we are facing are not new,” Jamil noted. “There is a greater need for us to come up with a standard approach to liquidity management and I hope that eventually a common one will prevail,” he said.

Clic here to read the story from its source.