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Thursday, 10 July 2014

Luxembourg approves bill paving way for sukuk this year

Luxembourg's parliament passed a bill that will allow the AAA-rated government to issue its first Islamic bond later this year, becoming only the second European sovereign after Britain to tap the market for sukuk.
The bill allows Luxembourg to securitise three government properties to back a sukuk worth 200 million euros ($275 million), designed to boost its Islamic finance credentials to attract more business from cash-rich Gulf countries.
The law was adopted with 55 votes in favour and 5 against, a parliament spokesperson said late on Wednesday.
A revised bill was presented last month which addressed issues such as the economic rationale for using sukuk instead of conventional bonds and clarified its tax treatment, paving the way for the finance ministry to begin work on the transaction.
"The issuance of the sukuk will be done later this year," said Guy Arendt, a member of Luxembourg's legislature, the Chamber of Deputies.
Luxembourg's finance ministry did not respond to Reuters requests for comment on its sukuk plans, but such an issuance would comes on the heels of Britain's own sukuk.
In June, Britain became the first Western country to sell sukuk, raising 200 million pounds from a five-year deal, attracting 2.3 billion pounds in orders.
Unlike Britain, which has six full-fledged Islamic banks, Luxembourg does not have a domestic Islamic banking industry although that could soon change.
A new Islamic bank, named Eurisbank, is in the advanced stages of launching operations in Luxembourg, according to a source familiar with the matter.
"The license process is still in progress, but significant advances have been made and it should be finalised in the next few weeks. Capital is firmed up...first semester next year seems very realistic."
Luxembourg has sought to build a wider role in the industry: it remains a popular domicile for Islamic mutual funds with London-based Arabesque registering its new funds in June.

Luxembourg's central bank also remains the only regulator in Europe that is a member of the Malaysia-based Islamic Financial Services Board, one of the industry's main standard-setting bodies. 
(Reuters / 09 July 2014)
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Islamic finance reviewed

MANAMA: Innovation, growth and talent shortages in Islamic finance were the subject of key workshops in Bahrain.
Hosted by Bahrain-based Deloitte Islamic Finance Knowledge Centre (IFKC) in the Middle East and the Islamic Research ND Training Institute (IRTI), a member of the Islamic Development Bank (IDB) Group, the workshops targeted different industry practitioners, investors and issuers on the topics of risk governance and talent development in Islamic finance.
Deloitte said the event aimed at addressing multiple challenges facing Islamic finance.
In a changing industry practice and regulation, development and retention of talent is impacting on innovations and pattern of growth.
Additionally, Islamic financial services are realising that their risk management functions may not be as effective as they should be thus impacting shareholder value.
"Risk management in Islamic finance is one of the major concerns faced by all industry practitioners, as the numerous types of risks faced by Islamic banks - Sharia compliance, liquidity, credit, operational and regulatory risks - all have a significant impact on the business sustainability and going concern," said Deloitte Middle East financial services industry leader Joe El Fadl.
"As such, the board's risk oversight role is critical in providing clarity in the direction of strong risk mitigating controls."
The first workshop entitled: "Strengthening Risk Governance in Islamic Finance," addressed the challenges that need to be faced to strengthen risk governance in the sector.
The programme enabled better understanding and appreciation for the necessity of a well-equipped risk and corporate governance function.
Another objective of the programme was to discuss and provide practical insights to successfully structure and manage an effective risk governance strategy, and to strengthen risk management strategies and methods to comply with regulatory and self-regulatory requirements.
"The Islamic finance industry lacks risk management standards, risk assessment and risk mitigation tools needed for it to compete on a level playing field with traditional banks," said IRTI director general Professor Mohammad Azmi Omar.
"This workshop addressed these issues and provided participants with best practices learned from leading Islamic banks."
The second workshop, entitled: "Talent Development in Islamic Finance" tackled the development and retention of talent in a changing industry.
"The Deloitte, Finance Accreditation Agency (FAA) and IRTI executive workshop on talent development in Islamic finance is timely in addressing the challenges facing the global Islamic finance workforce," said FAA chief executive Dr Amat Taap Manshor.
"FAA is pleased with the level of participation and interaction from various stakeholders and hopes similar platforms are organised in other parts of the world to further strengthen the effort to develop world-class talent in the Islamic financial services industry," he said.
"We had very interactive discussions in both workshops; participants expressed their opinions in a highly professional way and made constructive criticism to representatives of regulatory and standard setters' bodies," IFKC director Dr Hatim El Tahir.
"Our main objective was to create a friendly dialogue environment between the regulators, standard setters and practitioners to agree on issues of differences and difficulties in the practice."
(Gulf Daily News / 10 July 2014)
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