Bahrain has launched a project to promote a pioneering project to help Islamic banks manage their excess liquidity, reported the Gulf Daily News on Saturday.
It said that the Bahrain Monetary Agency (BMA) has urged financial institutions in the Gulf Cooperation Council (GCC) to participate in a Liquidity Management Company (LMC), which is being set up in Manama, with an initial capital of $50 million.
The LMC, which will act like a market maker by creating short-term liquidity instruments for Islamic banks, is a project of BMA.
An implementation committee was formed earlier to start developing this project, said BMA executive director, banking operations Khalid Abdulla Al Bassam.
Ernst & Young, which did the feasibility study for the project, has been appointed as the financial advisor and has been mandated to conduct a campaign to promote the LMC among major Islamic financial institutions and conventional banks in the region.
The response from the regional banking community is very encouraging, said Al Bassam.
The banks that have been approached so far have expressed interest in participating in the project.
The LMC is a key element of a larger effort to create an International Islamic Financial Market (IIFM), he said.
The initiative to establish the IIFM is being spearheaded by the BMA, the Islamic Development Bank (IDB) and Malaysias Labuan Offshore Financial Supervisory Authority (Lofsa), the three signatories to a memorandum of understanding (MoU) signed in October, 1999, to create the project.
Since then, the central banks of Brunei, Sudan and Indonesia have also joined in, he added – Albawaba.com
