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image Introduction to Risk Management in Islamic Banking – Basel II Compliance.
Event date: - 2012-12-07
   
image 12th Annual Islamic Finance Summit
Event date: - 2013-02-26
   
image The 3rd PPP MENA Conference
Event date: - 2013-03-17
   
image Islamic Finance Forum Europe
Event date: - 2013-05-28
   
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Banking is a business where depositors are normally free to deposit and withdraw their savings according to their preferences and financial plans. This unpredictability of behaviour put the managers under intense pressure and requires high level of skill to achieve optimality of resources at hand.

Traditionally banks manage their liquidity by investing in short term interest based securities which is not the cup of tea for an Islamic banking. Funds must emanate from a Shariah-compliant source and they need to be taken up by a Shariah-compliant source. In some places, there is no infrastructure in place to ensure that the funds are ‘clean’ Shariah-compliant. Islamic banking industry including Islamic banking windows face seriously the challenge of shortage in liquidity management instruments. For a while Islamic banks claim that they have strong capital base but is it enough? A strong capital base must be supported by strong liquidity management instruments.

Islamic liquidity market and Islamic capital markets are important for a resilient and sustainable Islamic finance system. Inter-bank market, debt instruments eg certificates of deposits (CDs), different types of bonds are some of the instruments available to conventional banks to manage their liquidity but many of them wouldn’t be available in Islamic banking. Analysing the issue partly Islamic banks, facing the challenge in their day-to-day liquidity management because of the lack of a comprehensive Islamic interbank money market. Is the lack of comprehensive Islamic money market related to Shariah governance standards? It seems that the standards are there, but they are not being paid proper attention by Shariah boards and individual Islamic Finance institutions. Some of Liquidity issues of Islamic banks could be related to lack of instruments, non-standard documents and processes, counter-party or credit risk.

One of the key issues of liquidity management could be reviewed more effectively by enhancing the role of the board, the Shariah Committee and the management in relation to Shariah matters, including enhancing the relevant key organs having the responsibility to execute the Shariah compliance , introducing new instruments and research functions aimed at the attainment of a Shariah-based operating environment. Farhad Reyazat
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Author/Publisher: - Dr. Paul Temporal
   
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 Islamic finance is becoming an integral part of the global finance industry and has taken its roots in almost all of the Muslim countries but has also been under discussion and penetration in selective Western and Far Eastern jurisdictions

Moinuddin Malim, CEO, Mashreq Al Islami


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