THE Ministry of Finance (MoF) along with the South East Asian Central Bank (SEACEN) Islamic Research and Training Institute of the Islamic Development Bank today inaugurated a five-day workshop on building a sustainable Islamic banking system via liquidity management.
In his opening speech, Hj Mohd Roselan Hj Mohd Daud, Permanent Secretary of the Ministry of Finance, highlighted the timeliness and urgency in which the issue of sustainability of the Islamic banking system needs to be addressed.
The rapid growth of the Islamic banking sector globally has seen total Islamic banking assets rise more than 28 per cent to US$822 billion from 2008 to 2009 alone, he said, adding however that 'complacency' should be avoided as there is still a long way to go.
Hj Mohd Roselan also linked the strength of the Islamic financial system to it's survival through the recent global economic crisis, which he observed as being brought on by a liquidity crisis on an individual bank level as well as on a systematic basis.
Dr AG Karusena, executive director of the SEACEN Centre, added that this "clearly demonstrates the consequences of liquidity constraints (and) underscored the importance of a strong and well developed liquidity management system including the infrastructure". Karusena also added that it is "critical for central bankers, monetary authorities and officials in finance ministries to improve their understanding on liquidity management in Islamic financial markets, and to share their experiences in order to ensure sound and sustainable growth".
The reforms to combat this issue, instilled by the Basel Committee (international standards setter for banks) would most likely have "serious implications for Islamic banks and may exacerbate liquidity risk in many Islamic financial markets due to the limited stock of Shariah-compliant government securities that will meet the proposed narrow definition of liquid assets".
As such, the issue of liquidity management to ensure sustainability of the Islamic Banking system would also be under discussion at the workshop. SEACEN stated that key objectives of the workshop are to "discuss the legal and regulatory framework for Islamic Banking, discover the linkages between Islamic banking systems with Islamic capital and money markets for liquidity management, examine the sukuk structuring and approval process as well as discussing the issues and challenges in Islamic Liquidity Management in compliance with Shariah principles".The Brunei Times
Source : http://www.bt.com.bn/business-national/2010/11/02/urgent-need-look-sustainability-islamic-banking - Nov 2, 2010
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