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Islamic Capital Markets and Products Managing Capital and Liquidity Requirements Under Basel III von Archer, Simon (eBook)

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Islamic Capital Markets and Products

Ensure Basel III compliance with expert analysis specific to Islamic Finance Islamic Capital Markets and Products provides a thorough examination of Islamic capital markets (ICM), with particular attention to the products that they offer and the legal and regulatory infrastructure within which they operate. Since Islamic banks act as asset managers, attention is paid to the regulatory challenges which they face in the light of Basel III, as regards both eligible capital and liquidity risk management. The authors of the chapters are professionals and practitioners, and write from experience. The editors also contributed to some of the chapters. The markets and products covered include Islamic equities, Islamic investment certificates (Sukūk) which are Shari'ah compliant alternatives to conventional bonds, and Islamic Collective Investment Schemes. The coverage of legal and regulatory issues includes an examination of the implications for ICM of securities laws and regulations and of Basel III, as well as collateralisation issues. Shari'ah compliance aspects, in terms both of the selection criteria for Islamic equities and of the 'purification' of impermissible components of income, are also examined in some detail, as are the implications of Basel III for eligible capital in general and for Shari'ah compliant capital instruments in particular. A similar analysis is also made of the implications of the Basel III requirements for liquidity risk management and high quality liquid assets (HQLA), including Shari'ah compliant HQLA. The book concludes with three case studies, two describing the ICM in Malaysia and Bahrain and a third which describes Sukūk issued as Shari'ah compliant capital instruments, followed by brief concluding remarks by the editors. SIMON ARCHER is a visiting professor at the ICMA Centre, the ground-breaking collaboration between the securities industry and Henley Business School, University of Reading (also UK). In addition to teaching, he has served as a consultant to the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). In 2010, the Central Bank of Bahrain and Kuwait Finance House - Bahrain presented Professor Archer with a special award to recognise his contributions to the field of Islamic Finance. In addition to being co-editor of Takaful Islamic Insurance: Concepts and Regulatory Issues and co-author of Islamic Finance: The New Regulatory Challenge, Second Edition (published by Wiley), Professor Archer is also co-author of the CCH International Accounting/Financial Reporting Standards Guide and the author of a considerable number of academic papers on international accounting and on accounting, finance, and related issues in Islamic financial institutions. RIFAAT AHMED ABDEL KARIM was previously the CEO of the International Islamic Liquidity Management Corporation (IILM). He is a globally respected pioneer in the development of Islamic finance, and served as the inaugural Secretary General at both the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). Professor Karim received the 2016 Malaysian Royal Award for Islamic Finance. In addition to international recognition of his academic publications, which are mainly in tier-one international journals in the field of Islamic finance, he has garnered numerous accolades for his pioneering work, including the inaugural Euromoney Outstanding Contribution to the Development of Islamic Finance Award (2004) and the Islamic Development Bank Award for Islamic Banking and Finance (2010). He is the co-author of Islamic Finance: The New Regulatory Challenge, Second Edition and co-editor of Takaful Islamic Insurance: Concepts and Regulatory Issues. Professor Karim is adjunct research professor at the International Centre for Education in Islamic Finance (INCEIF), The Global University of Islami


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    Seitenzahl: 328
    Sprache: Englisch
    ISBN: 9781119218814
    Verlag: Wiley
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Islamic Capital Markets and Products

Overview of the Islamic Capital Market

By Simon Archer, Brandon Davies and Rifaat Ahmed Abdel Karim

This chapter provides an extensive overview of the Islamic capital market (ICM), or more broadly the Shari'ah-compliant finance industry, and its various segments, including equities, sukuk (Islamic investment certificates), investment funds and Islamic banks. This overview is presented in the context of the international capital markets of which the ICM forms a growing part. Later chapters in this volume deal in more detail with various aspects of the ICM, including Islamic equities, sukuk , Islamic investment funds and legal, Shari'ah and regulatory issues.

The beginning of the modern Islamic financial industry can be dated to the mid-1970s. Fundamentally different in some important respects from the conventional financial model, Islamic finance has its religious identity and is based on the principles of Shari'ah (Islamic law) and the rules of Fiqh al Muamalat (Shari'ah commercial jurisprudence).

Total assets of Shari'ah-compliant financial institutions have grown by an average of 15-20 percent per annum over the past five years, suggesting strong demand for Islamic investing. It is expected that Islamic finance will continue to grow at this rate for the next few years. The figure for total assets in Islamic finance was around USD2.0 trillion at the end of 2015.

The growth in Shari'ah-compliant finance has also been mirrored in the growth of Shari'ah-compliant investment funds. It is estimated that currently there are more than USD75 billion under management in Shari'ah-compliant investment funds, while s ukuk outstanding now amount to around USD300m ( Table 1.1 ).

TABLE 1.1 Breakdown of Islamic finance segments by region (USD billion, 2015 YTD)

Source : IFSB Secretariat Workings
Region Banking Assets Sukuk Outstanding Islamic Funds' Assets Takaful Contributions Asia 209.3 174.7 23.2 5.2 Gulf Cooperation Council countries 598.8 103.7 31.2 10.4 The Middle East and North Africa (MENA) region (exc. GCC) 607.5 9.4 0.3 7.1 Sub-Saharan Africa 24.0 0.7 1.4 0.5 Others 56.9 2.1 15.2 - Total 1,496.5 290.6 71.3 23.2
Note : Data for banking and takaful as of 1H2015, while for s ukuk and funds as of 11M15.

The majority of Shari'ah-based assets are, however, still banking assets which comprise around 75 percent of the total Shari'ah assets, but this represents a significant opportunity for s ukuk (Shari'ah-compliant investment certificates which take the place of bonds) issuance. If we contrast major companies in the GCC area with major international companies the funding differences are stark. Major GCC companies average less than 50 percent bond versus bank funding, whereas major international companies average over 90 percent bond funding. This indicates that there is a significant opportunity for growth in the corporate s ukuk market in GCC countries in particular.

Overall, Shari'ah-compliant finance assets are heavily concentrated in the Middle East and Asia, although the number of new markets is expanding, especially in Malaysia and other parts of South East Asia. The GCC region, with around 38 percent of total Shari'ah-

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