Islamic Financial Services Industry stakeholders to discuss new financial architecture and its challenges in 7th IFSB annual summit in Bahrain
As the world emerges out of recession, financial authorities the world over are in the process of developing and implementing a comprehensive infrastructure to address the new challenges confronting the international financial system. Given the scale and scope of the crisis, confronting these new challenges would inevitably involve discussions and actions for an integrated crisis management framework. The G20 for example has launched an agenda to reform financial regulations, the key areas of which include the strengthening of international frameworks for prudential regulation, the review of the scope of regulation, the revision of accounting standards, and more effective oversight of credit rating agencies as well as strengthening risk management.
These new challenges are also relevant to the global Islamic financial services industry, which needs to ensure its resilience, as well as how it might contribute to global financial stability and sustained economic growth. This is most pertinent as the financial crisis has stimulated greater international interest in Islamic finance and its potential role in shaping a future sustainable global financial system.
The Islamic Financial Services Board (IFSB) is at the forefront of international efforts to increase regulatory cooperation and to introduce common prudential and supervisory standards for the global Islamic financial services industry (IFSI). Professor Rifaat Ahmed Abdel Karim, IFSB Secretary-General, emphasised that any new financial architecture or financial reforms must also accommodate the specificities of Islamic finance. “Since the distinctive characteristics of Sharī`ah-compliant financial transactions raise a number of issues related to the risks borne by institutions offering Islamic financial services (IIFS), and failure to adequately recognise and manage these risks could impose systemic risk to the entire financial system and jeopardise the stability and soundness of the industry,” he added.
As such, the need to develop uniform prudential and best practices standards that are tailored to the specific characteristics of these IIFS is vital.
Against the above backdrop, the theme of this year’s 7th IFSB Annual Summit “Global Financial Architecture: Challenges for Islamic Finance” could not be more pertinent. The Summit is due to be held on 4 - 5 May 2010 at the Ritz-Carlton in Manama, Bahrain, which the Central Bank of Bahrain is hosting.
It will be attended by key regulators in global IFSI, who have all confirmed their participation. These include, among them, the participation of the Central Banks of Bahrain, Kuwait, Lebanon, Mauritius, Nigeria, Saudi Arabia, Singapore, South Korea and Sweden. The participation of the regulators from new markets in Northern Europe and Africa is indicative of the growing worldwide interest in the industry.
For instance, Stefan Ingves, Governor, Central Bank of Sweden and Rundheersing Bheenick, Governor of Bank of Mauritius will both be making their debut participation at an IFSB Annual Summit. Similarly, Sanusi Lamido Aminu Sanusi, the new Governor of the Central Bank of Nigeria, has also confirmed his participation. Bank of Mauritius became a Full Member of the IFSB in November 2007, and the Central Bank of Nigeria in April 2009. Both are on the IFSB Council. On top of these regulators, several international organisations including the Bank for International Settlements, International Organisation of Securities Commisions, The World Bank, and market players from various industry segments, including financial institutions, advisory firms, international credit rating agencies and law firms have also confirmed their participation.
The main issues of this year’s Summit are reflected in the five session topics which are:
• The Changing Landscape of Financial Regulation: Implications for Islamic Finance
• Macro-Prudential Surveillance Issues for Islamic Finance
• New Architecture for Liquidity Management for Islamic Financial Instruments
• Balanced Growth of Islamic Finance - the Sectoral Composition of the Islamic Financial Services Industry as a Contributor to Growth with Stability
• New Islamic Financial Architecture: Challenges Ahead
The main proceedings will be preceded by two traditional pre-Summit events – a Public Hearing on IFSB Exposure Draft and the IFSB Country Showcases, both of which have proved popular and informative in the past.
This year the Public Hearing will be on the IFSB Exposure Draft on Solvency Requirements for Takāful Undertakings. The Public Hearing is held within the Public Consultation period of a proposed draft standard, which is part of the due process in the IFSB preparation of standards. Under Article 4 (a) of the IFSB Articles of Agreement a key objective of the standard-setting Board for global Islamic finance is "to promote the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing, international standards consistent with Sharī`ah principles, and recommend these for adoption."
There will also be a number of country showcases organised on 3rd May 2010. These IFSB Country Showcases are an effective platform for selected countries to portray their Islamic finance initiatives and experiences in adopting and promoting the growth of a sound and stable Islamic financial services industry, and presented to a high profile, focused group of potential investors and stakeholders. It is also an excellent opportunity for networking and opening doors to potential investments and business partnerships - from among the IFSB members as well as the local, regional and international financial community - specifically those attending the Summit.
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