How to Regulate Islamic Financial Markets and - Central Bankingкод для вставки
The independent world forum for central bankers and financial supervisors Training course/seminar series 2011 How to Regulate Islamic Financial Markets and Products 4-day intensive residential programme 13 вЂ“ 16 September 2011 ChristвЂ™s College, Cambridge Course chairman: Dr Aly Khorshid Director of Islamic Finance Studies, Academy UK and Sharia Board Member Series adviser: Charles Goodhart, CBE Professor Emeritus London School of Economics Financial Markets Group www.centralbanking.com/events Hosted by Central Banking Publications Dear Delegate, Since its inception just over four decades ago, the modern Islamic finance industry has grown rapidly. Today, it is estimated to have assets under management of over half a trillion US dollars. Driving this growth has been the development of new and innovative products and markets including takaful and sukuk. Coupled with this in recent years has been the emergence of global standard setters including bodies such as the Islamic Financial Services Board (IFSB), the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOFI) and in 2010, the International Islamic Liquidity Management Corporation (IILM). It has been argued that regulating Islamic finance alongside conventional finance can hinder one or the other. While progress has been made to bridge the gap, there remains considerable scope for interpretation. The challenge for central banks and regulatory bodies is to create a supervisory framework for Islamic finance which manages risk but also encourages growth. This is easier said than done. The IFSB and AAOIFI have gone some way to assist jurisdictions in developing such a framework, however with the rapid growth of the industry central banks and regulators have to stay abreast of industry developments and adapt in order to supervise new and emerging products and markets. This seminar will equip regulatory specialists from central banks and supervisory authorities with the tools to understand this important part of the global economy and build a framework to enable development within their jurisdiction. Delegates will be able to question industry practitioners and experts and discuss solutions to the specific challenges they face within their respective jurisdictions. Key sessions will focus on: вЂў вЂў вЂў вЂў вЂў вЂў вЂў вЂў New developments in IFSB prudential standards AAOIFI accounting, auditing and disclosure standards Developing a domestic Islamic financial infrastructure Licensing and supervising Islamic banks in a duel regulatory system Best practice approaches for regulating sukuk and takaful New developments in liquidity management An Islamic bankвЂ™s perspective of being supervised Interactive panel discussion with respected Sharia scholars The panel of expert speakers combine practical regulatory experience as well as perspectives from private sector experts and academics, including: вЂў Mehmet Asutay, Lecturer in Islamic finance, Durham University вЂў Didier Peny, Director, Licensing, Authorisation and Regulation, Banque de France вЂў Omar Sheikh, UK Treasury Advisory Sub-Committee and Board Member, UKIFC вЂў JoГ«lle el Gemayel, Research Assistant to the First Vice-Governor, Banque du Liban вЂў H amim Syahrum Ahmad Mokhtar, Deputy Director, Financial Surveillance, Bank Negara Malaysia вЂў H amayon Dar, CEO and Shariah Advisor, BMB Islamic вЂў Sunando Roy, Advisor, Central Bank of Bahrain We are delighted to welcome Dr Aly Khorshid, Director of Islamic Studies at Academy UK and a serving Sharia board member at numerous banks, as chairman for this yearвЂ™s seminar. The four-day programme of interactive roundtable seminars and workshops offers practical examples of how Islamic finance works and more importantly, how to overcome supervisory challenges. Each session allows participating supervisors and central bankers an opportunity to вЂњbenchmarkвЂќ their work against leading thinking and practice internationally and to exchange views with their peers in an informal setting. This format, as more than 3,000 central bankers and regulators can attest, encourages delegates to quiz panellists, raise issues and discuss solutions to the specific challenges they face. I look forward to welcoming you to Christ College this year. Yours sincerely, Robert Pringle Chairman Central Banking Publications How to Regulate Islamic Financial Markets and Products Autumn 2011 Tuesday 13 September The evolution of Islamic finance and its regulatory standards Opening remarks and participant experience Aly Khorshid, Director of Islamic Finance Studies, Academy UK and Sharia Board Member This session sets the scene with a review of the key challenges confronting supervisors in their home institutions and the latest international developments in relation to Islamic finance. Delegates will be invited to give a brief account of their local regulatory system and explain their most pressing regulatory and supervisory challenges. This session is an opportunity for delegates to benefit from each otherвЂ™s expertise and experience in confronting common problems. The evolution of Islamic finance: where is the industry today? Mehmet Asutay, Lecturer, Durham University Islamic finance has grown significantly since its emergence in modern form in the 1960s. Today, as a global industry involving banking, insurance and capital markets, its reach extends beyond traditional Muslim jurisdictions, and into the western world and the Asia Pacific region. The speaker, a leading scholar on the development of Islamic finance, will chart the evolution of the sector, identifying recent and long-term trends and significant developments such as the growth of the sukuk market and the potential for takaful and other products. Recent developments in IFSB and AAOIFI standards JoГ«lle el Gemayel, Research Assistant to the First Vice-Governor, Banque du Liban Khairul Nizam, Assistant Secretary General, Accounting and Auditing Organization for Islamic Financial Institutions (invited) Underpinning regulation of Islamic finance today is a range of prudential and supervisory standards developed by the IFSB and AAOIFI which have been likened to an Islamic finance equivalent of Basel II. In December 2010 the IFSB published their standard for solvency requirements for takaful, and are looking to develop new standards in the near future. It is important for central banks and regulators to stay abreast of these standards which are constantly being developed. In this session, the speakers will discuss recent and likely developments in these standards and how a central bank can translate these effectively into their framework. Group discussion will conclude by addressing the extent to which uniformity of regulation is both desirable and practical for both Islamic and conventional finance. About the course chairman Dr Aly Khorshid has been involved with financial institutions for over two decades. Drawing on his knowledge of Islamic finance, he has advised central banks and Islamic banks on regulatory approaches and corporate governance. He has been active in structuring Islamic home purchase schemes and Islamic capital market products. His first Shariah board member role was with bank Al-Baraka, which was the first Islamic bank in the UK. His roles included dealing with the UK treasury and Bank of England. He now serves as a Shariah board member within several Islamic institutions. He has PhD in Islamic studies and economics from the University of Leeds, studied Fiqh and Shariah at Al-Azhar University in Egypt and possesses a masterвЂ™s degree in management. Wednesday 14 September Building the regulatory framework How to implement a domestic regulatory and supervisory framework Omar Sheikh, Committee Member, UK Treasury Advisory Sub-Committee and Board Member, UKIFC The development of a legal framework for governing, supervising and regulating Islamic banking may seem like an obvious stage of progression within a jurisdiction however development around the globe has been uneven with some jurisdictions at a more advanced stage than others. The United Kingdom is one jurisdiction that has been praised for establishment of an enabling fiscal and regulatory framework for Islamic finance. This has proved pivotal for development of the industry not only in the UK, but also in attracting business to the country In this session, the speaker, a leading authority in the development of Islamic finance in the UK, will draw out lessons from the UK experience identifying policies developed at governmental and regulatory level and how they worked with the industry itself. Licensing and supervising Islamic banks in a dual regulatory system JoГ«lle el Gemayel, Research Assistant to the first Vice-Governor, Banque du Liban The Islamic Financial Services Board has outlined concerns that Islamic banking will not be given enough regulatory attention in dual system states. How are such fears being addressed? Lebanon has made significant progress in promoting Islamic banking and has authorised a number of institutions including the Lebanese Islamic Bank and Al Baraka Bank since the central bank developed its regulatory framework for supervision in 2004. In this session, the speaker will outline the approach the Banque du Liban has taken in implementing Islamic finance in a dual regulatory system and how to overcome common licensing and regulatory challenges. Growth and diversity in the market: the experience of Malaysia Hamim Syahrum Ahmad Mokhtar, Deputy Director, Financial Surveillance, Bank Negara Malaysia Once a framework is established, central banks and regulators need to ensure itвЂ™s robust enough during times of stress.The Malaysian Islamic financial system is widely recognised as both robust and fast growing with a number of diverse market participants. These participants include Islamic banks, takaful companies, investment banks, savings institutions, fund managers, stock brokers and unit trusts. However, with growth comes the potential for risks at both micro and systemic level. Central banks and standard setters within the jurisdiction have developed a system designed to ensure the stability of the system but also allow innovation and growth. In this session, the speaker will provide lessons learned from the central banks experience focusing on mitigating systemic risk and contagion. Discussion will draw upon some of the industry leading practices currently exercised in the jurisdiction. Regulatory approaches for risk managing sukuk and takaful products Sunando Roy, Advisor, Central Bank of Bahrain Warren Edwards, CEO, Delphi Risk Management (invited) Sukuk and takaful products are the main stays of Islamic finance today. However, standards and regulation of these products are at different stages of development. The sukuk market is in the process of recovery following the Dubai debt crisis, and it has also been suggested that Sharia boards across the Middle East and the Far East have not reached a conclusion on standards for new issues of sukuk. Takaful has recently been subject to an IFSB standard and regulators are formulating strategies to supervise the industry. In this session, the speakers will focus on how regulators should approach the regulation of sukuk and takaful. Specific examples of bank capital calculations used in various jurisdictions will be provided and discussion will focus on how to develop country specific approaches. New developments in liquidity management Ellie Flatter, Liquidity and Prudential Surveillance, Central Bank of Luxembourg (invited) The lack of a cross-border liquid market infrastructure and instruments for the management of liquidity risk has been seen to be a long standing issue impacting the development and regulation of Islamic finance. In April 2010, in what has been viewed as a major triumph for the Islamic financial industry, 11 central banks and 2 multilateral organisations have recently signed the Articles of Agreement for the establishment of the International Islamic Liquidity Management Corporation (IILM). This is a significant development which is designed to provide to provide liquid short-term sharia compliant instruments. In this session the speaker will discuss how the IILM works, the progress it has made, and the benefits it can provide for central banks, regulators and the Islamic banks that they supervise. Thursday 15 September Sharia law and governance How to Regulate Islamic Financial Markets and Products Autumn 2011 The role of sharia boards and scholars Aly Khorshid, Director of Islamic Finance Studies, Academy UK and Sharia Board Member All Islamic banks have a sharia board which governs the products that they trade. It is important that central banks and regulators understand how they function and the level of influence they have within the banks that they supervise. It has been argued that Sharia scholars and their differing interpretations across different banks can lead to a lack of harmonisation which ultimately can impact their effectiveness as a provider of risk management and compliance within their respective banks. This can be a supervisory nightmare for central banks and regulators as interpretations can differ across the banks they supervise leading to challenges when developing a regulatory framework. In this session, led by the chairman, discussion will focus on how effective Sharia boards are within Islamic banks and what steps need to be taken to ensure the harmonisation of Sharia interpretations across jurisdictions. Panel discussion on Sharia governance Humayon Dar, CEO and Sharia Advisor, BMB Islamic Muhammad Imran Ashraf Usmani, Sharia board member, State Bank of Pakistan (invited) Moderated by Aly Khorshid Sharia advisory boards are an integral part of the governance structure of Islamic banks. In this session, two well-respected Sharia advisors will debate the pressing issues surrounding Sharia governance and its relationship with the regulatory framework. Particular attention will be devoted to the composition, make up and role of Sharia boards. Delegates will be invited to pose questions to the panel and discuss specific questions they have and challenges they face in this important and often misunderstood area. Developing talent within Sharia advisory boards Syed Azhan Syed Ahmad Bakhor, Islamic Capital Market Department, Securities Commission Malaysia (invited) In the third session of the day focussed on the role of advisory boards, the focus will be on developing relations with the scholarly community. Some observers contend that Sharia advisory boards are limited to a pool of scholars and that new, young experts need to be recruited to ensure Islamic finance remains contemporary and flexible. Malaysia has tried to tackle this issue with the development of a Sharia Governance Framework (SGF) which requires Sharia boards to recruit a younger scholar. In this session, the speaker will explain how this framework works and offer an assessment discussing how Sharia boards can evolve through talent development and the role which central banks and regulators can play drawing on the example of Malaysia. Being supervised: an Islamic bankвЂ™s perspective Michael Clarke, Chief Executive Officer, European Financial House (invited) In this session the speaker, a senior figure from an Islamic bank, will discuss the supervision of Islamic banks from a banks perspective. The speaker will provide a critical insight into the role of regulators and discuss specific issues in relation to the emerging regulatory framework from a regulated perspective. Discussion will focus on how central banks and regulators can gain a deeper understanding of the challenges their respective Islamic banks face in order to develop an appropriate supervisory approach Friday 16 September New directions for Islamic finance Case study: developing a financial hub for Islamic finance Ali Sakti, Director, Islamic Banking Directorate, Bank Indonesia (invited) Indonesia currently has 11 banks operating solely in compliance with Islamic finance requirements and a further 23 conventional institutions offering Sharia-compliant services. Islamic banking is seen to be one of the most rapidly expanding sectors in its economy and is widely considered to play a key role in IndonesiaвЂ™s economic development for years to come. In this session, the speaker, a key figure in the development of Islamic finance in the country, will outline growth plans and identify lessons that can be learnt for central banks to encourage innovation whilst maintaining stability. New opportunities for Islamic finance in Europe Didier Peny, Director, Licensing, Authorisation and Regulation, Banque de France In 2011, there has been growth in the trading of Islamic financial products from Middle Eastern and far eastern jurisdictions to Europe. Most notably, Dubai has increased trading of sukuk and other products to France and Germany due to tax advantages. Luxembourg is also seen to be emerging as a hub for Islamic finance as again, tax authorities have recognised the specific requirements of Islamic products. In this session, the speaker will identify the opportunities for growth of Islamic finance in Europe and identify what steps Islamic banks and their relevant supervisors can take to capitalise on the opportunities that are available. Lessons learned and action points Led by the chairman In this final round-up session, the chairman will revisit the key lessons from the sessions over the course of the four days. This final workshop session will highlight some the main ideas for further development and reflection, and will bring the course to a close. 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