منتدى التمويل الإسلامي

يهتم هذا المنتدى بالدرجة الأولى بعرض مساهمات الباحثين في مختلف مجالات العلوم الاقتصادية، كما يركز على الاقتصاد الإسلامي، و هو موجه للباحثين في الاقتصاد و الطلبة و المبتدئين و الراغبين في التعرف على الاقتصاد و الاقتصاد الإسلامي....مرحباً بالجميع
 
الرئيسيةالبوابةمكتبة الصورس .و .جبحـثالتسجيلقائمة الاعضاءالمجموعاتدخول

شاطر | 
 

 ISLAMIC FINANCE :THE road to basel2

استعرض الموضوع السابق استعرض الموضوع التالي اذهب الى الأسفل 
كاتب الموضوعرسالة
ch.ch
مشرف
مشرف


عدد الرسائل : 2822
تاريخ التسجيل : 23/12/2007

مُساهمةموضوع: ISLAMIC FINANCE :THE road to basel2   الخميس 27 مارس - 0:28

Islamic finance :the road to basel 2


Guendouz

12/09/07

The new Basel capital Accord is creating headaches for banks around the globe. However, Middle Eastern institutions that offer Islamic banking products have even more hurdles to jump
Europe is in the final stages of preparing for Basel II, set for implementation in January next year, while US regulators are still deciding how they want to apply the Accord to their financial institutions. For banks in the Middle East, however, particularly those engaged in Islamic finance, applying Basel II is a different story altogether.
The majority of Middle Eastern banks engage in both conventional and Islamic banking, so applying Basel II requires not only compliance with the core principals of the Accord, but also means working out how the concepts outlined in the framework fit in with Islamic law.
Different countries in the Middle East are at different stages of implementation. Bahrain, for example, wants its banks to comply with Basel II by 2008, as does Saudi Arabia. At a seminar held in Riyadh in May, Hamad Al-Sayari, governor of the Saudi Arabian Monetary Authority (Sama), said the country's banks are well on their way to implementation.
"
We expect all banks operating in Saudi Arabia to implement the standardised approach for credit risk by January 1, 2008, and then continue to move towards more sophisticated internal ratings-based (IRB) approaches. For operational risk, all banks are likely to move to the standardised approach, with one or two banks experimenting with the advanced measurement approaches," he said.
Banks in Qatar, however, were set a deadline of this year to begin reporting under Basel II's most basic risk assessment approaches. Ahmed Abdi Sheikh, executive manager in risk management at Doha-based Qatar National Bank, says his institution has been complying with Basel II for almost a year, having worked closely with the monetary authority, the Qatar Central Bank, and the country's other banks to meet the deadline.
"
The central bank put together a team of risk managers from the different banks in Qatar, along with a couple of people from the central bank itself, and in the past couple of years we've had frequent meetings to develop a strategy for Basel II implementation for the country," says Abdi Sheikh. "For almost a year now, we have been meeting our capital adequacy ratios in accordance with Basel II guidelines." He adds that the bank is, for now, sticking with the basic indicator approach for operational risk and the standardised approach for measuring credit risk.
Qatar National Bank now reports capital adequacy ratios to the central bank on a monthly basis. "The information is extracted from our banking systems and other applications, and it gets disseminated through the internet to the central bank," says Abdi Sheikh. The firm uses JP Morgan's Horizon system for managing operational risk, which lets its risk managers conduct self-assessment exercises and perform risk-event analysis. However, the bank has not yet purchased a system to manage credit risk. Abdi Sheikh argues that the firm does not need a sophisticated credit risk measurement system at the moment because it uses the standardised approach - where capital weightings for sovereigns, corporates and banks are based on ratings from external rating agencies such as Moody's Investors Service and Standard & Poor's. In future, though, it may need to buy a sophisticated model from a third-party vendor. "Even though the central bank doesn't require us to go to the foundation or the advanced IRB approach, we expect it to come to us in a couple of years and ask us to move to the next level. It is in our plan to prepare for that, and we have done a lot of work already internally," he says.

However, moving to the more advanced approaches could prove difficult for many banks in the Middle East, primarily because of the shortage of detailed historical default data. "The major issue in moving to the next level is the availability of quality data in order to produce the probability of default (PD) and the loss given default estimates," says Abdi Sheikh.
"
PD data is the biggest stumbling block," agrees Riyadh-based Sam Tereblanche, a consultant

_________________
http://www.shbab1.com/2minutes.htm
الرجوع الى أعلى الصفحة اذهب الى الأسفل
معاينة صفحة البيانات الشخصي للعضو http://islamfin.go-forum.net/forum.htm
ch.ch
مشرف
مشرف


عدد الرسائل : 2822
تاريخ التسجيل : 23/12/2007

مُساهمةموضوع: رد: ISLAMIC FINANCE :THE road to basel2   الخميس 27 مارس - 0:29

employed by Saudi Arabia's Riyad Bank to implement its Basel II systems. "The pure concept of PD is not understood 100% here, although people are moving towards that." Banks in the region are so well capitalised and the deals so heavily collateralised that when defaults do occur, they have a negligible economic impact, he says. "And the economy here has been exceptionally good for the past five years, so there haven't really been any defaults."
As in other regions, steps are being taken to address the data issue. Saudi banks are working to create a national data pooling system for credit risk. In Qatar, there is a scheme to create a national database, and banks are also working on collecting their own historical data, says Abdi Sheikh.
Meanwhile, there has been some talk about creating a pooled data system at the multi-national level, specifically in relation to Islamic countries - although this is at an early stage. For smaller countries, such as Bahrain, a shared database would be especially helpful. "You need at least 2,000 corporate names for any database to work properly and generate adequate PDs, and in Bahrain we do not have that minimum," says Khalid Hamad, executive director of banking supervision at the Bahrain Monetary Authority (BMA). "We determined that a bank alone cannot generate realistic PD data on a stand-alone basis."
However, a number of issues must be resolved before a regional pooled database can emerge. "It is an idea, but it needs a lot of work and approval," adds Hamad. "To combine data, for example, from the GCC (the states that form the Gulf Cooperation Council) would require the relaxation of some confidentiality rules imposed by central banks on their banks. It would need the approval of all central banks involved, as well as the banks themselves, and to some extent, the approval of the corporates, because data on their exposures would have to be disclosed."
In the meantime, the BMA intends to let its banks use proxy data from the rating agencies. "Once the bank has established a rating engine, we will allow it to map its ratings to the ratings of two or three rating agencies. They will then be able to use the PDs associated with the rating agencies' rating," says Hamad. "For this, we have to have a dynamic mechanism for monitoring the reasonableness of the exposures. So we will be proactive with the banks in the first few years to make sure the PDs used are not lower or higher than they should be for our market."
Despite the fact the majority of banks in the region are starting with the standardised approach, many are intent on moving towards advanced approaches at some stage. "Almost every bank we have spoken to was very clear that it would go to the advanced approach sooner or later," says Andreas Raggl, Reuters' head of risk for the Middle East and Africa.
Using proxy databases potentially offers a route for any Middle Eastern bank to aspire to the higher echelons of Basel II reporting and compliance. But that still leaves the difficulty of collecting historical data on Islamic - or sharia-compliant - products.

In fact, a major challenge is how such products should be treated under Basel II. Under sharia law, banks cannot engage in transactions that could be deemed speculative, pay interest and involve contractual uncertainty. Transactions are also usually backed by assets. Murabaha, salam and istisna contracts, for instance, are based on the sale or purchase of an asset, while ijara contracts are based on selling the benefits of such an asset. Profit-sharing deals (musharaka and mudaraba) are also common, as is financing raised through the issuance of Islamic bonds, known as sukuk.
"
A major issue for Islamic banks under Basel II is a clear understanding of the particular risk characteristics ofIslamic financial products. Are they loans and deposits, or are they to be treated as equity - or indeed, as loan/equity hybrids? What is the true nature of asset backing? Are the products equity-like profitand loss sharing products, or mark-up leases and sale and repurchase agreements?Are they bank liabilities, oris the bank afund manager?" asks Warren Edwardes, Basel II consultant and chief executive of Delphi Risk Management, a London-based consulting and training firm. "The answer to these questions will make a big difference to the capital backing required."
But steps are being taken to bring clarity to these issues. Last December, the Malaysia-based Islamic Financial Services Board (IFSC), an Islamic finance industry body, issued a paper called Capital Adequacy Standard for Institutions (other than Insurance Institutions) offering only Islamic Financial Services, which offers banks and monetary authorities a template for applying Basel II to sharia-compliant products.

_________________
http://www.shbab1.com/2minutes.htm
الرجوع الى أعلى الصفحة اذهب الى الأسفل
معاينة صفحة البيانات الشخصي للعضو http://islamfin.go-forum.net/forum.htm
ch.ch
مشرف
مشرف


عدد الرسائل : 2822
تاريخ التسجيل : 23/12/2007

مُساهمةموضوع: رد: ISLAMIC FINANCE :THE road to basel2   الخميس 27 مارس - 0:30

"A strategy was developed and finalised. It went through a working group and then through a technical committee - which comprised the executive directors of supervision in all the member countries - and then it went to the governors of central banks who are members of the IFSC, who then approved it," notes the BMA's Hamad, who sits on the IFSC technical committee.
The IFSC paper breaks down how sharia-based transactions should be defined, measured and treated under Basel II. The guidelines cover minimum capital adequacy requirements based on the standardised approach for credit risk and the basic indicator approach for operational risk, and the measurement methods for market risk as outlined in the 1996 Market Risk Amendment. For example, the IFSC states that musharaka and mudaraba transactions are similar to an equity position in the banking book, as defined by Basel II, and therefore give rise to credit risk, except in the case of investments, normally short term, which are for trading purposes and are subject to market risk capital requirements.
Under mudaraba - or profit sharing - contracts, the holder of an investment account bears all the credit and market risk of the position, while the operational risk is borne by the bank. That's because the investor would hand over capital and take a share in any profits (rather than receive interest) generated by the enterprise or activity, but could lose all the investment if the market turns sour. However, if negligence, fraud or breach of contract can be proved, the bank is liable for the investor's loss.



The implementation of Basel II under the IFSC template requires that operational risk be explicitly recognised, but that a different, reduced, risk weight be applied to the exposure to calculate the capital requirement. As Hamad explains, traditionally Islamic institutions take an outstanding exposure, halve it, then multiply this figure by a risk weighting to come up with a capital adequacy figure. "Rather than take 100% of the exposure multiplied by the risk weight, Islamic banks always apply 50% because of the convention that the Islamic banks do not bear losses - it's a fiduciary relationship, and the loss is always borne by the customer," he says.
Under Basel II, banks have to hold an explicit capital charge for operational risk - under the basic indicator approach, this is 15% of annual average gross income. Given that this would have previously been implicit in the capital adequacy charge, the new formula (covering risks other than operational risk) has reduced the capital charge for banks. So, rather than take the full amount at exposure, multiply it by 50% and then multiply that by the risk weight applied to the exposure, the IFSC has decreed that that 50% figure should be reduced to 30%.
This is just one of the ways Basel II is being adapted for Islamic finance. Other issues remain to be resolved though. The guidelines only address the standardised and basic indicator approaches, and do not cover pillars II and III - the parts of the Accord covering supervisory review and market disclosure, respectively. However, a working group is currently looking at how Islamic institutions can apply IRB models. Other groups are working on the treatment of complex sukuk that have a combination of underlyings, while another team is examining how real estate projects, where the financing bank is a joint developer, should be treated.
The IFSC's guidelines, however, are not binding. Just as with Basel's rules, it comes down to how the national regulators apply the framework. "There'll be differences between different countries, and ultimately it is the central banks that decide the exact regulatory discretions that need to be applied," says JivanthaMendis,director of credit and capital at Toronto-based risk management technology provider Algorithmics, which is implementing Basel compliance systems in the Middle East.
Most people agree that risk management within Middle Eastern banks will take a massive leap forward as a result of Basel II implementation. "We viewed this project from a strategic point of view, so we didn't look at Basel II as a compliance issue alone," says Qatar National Bank's Abdi Sheikh.
"
It will improve risk management because it is putting the emphasis on the right stuff, on proper risk management processes, on content and on procedures," adds Riyad Bank's Tereblanche.
One question, however, is whether the banks will benefit from a capital adequacy standpoint. In general, financial institutions in the Middle East are very well capitalised. Qatar's central bank imposes a minimum capital adequacy ratio of 10%, compared with 8% under the 1988 Basel Accord - but Abdi Sheikh says the banks are all well above that. Throughout the period 1992

_________________
http://www.shbab1.com/2minutes.htm
الرجوع الى أعلى الصفحة اذهب الى الأسفل
معاينة صفحة البيانات الشخصي للعضو http://islamfin.go-forum.net/forum.htm
ch.ch
مشرف
مشرف


عدد الرسائل : 2822
تاريخ التسجيل : 23/12/2007

مُساهمةموضوع: رد: ISLAMIC FINANCE :THE road to basel2   الخميس 27 مارس - 0:30

2005, Saudi banks have maintained capital adequacy ratios of more than 18%.
In his May speech, Sama governor Al-Sayari said he expects all Saudi banks to remain highly capitalised. Given the expectations by regulators that bank capital should remain high, is there an incentive for banks to invest in IRB-compliant systems? "I don't know what the benefit of going to the IRB approaches is," says Tereblanche. Unless capital adequacy ratios are allowed to fall, with the freed capital put to more productive use, banks in the region may ask what the point of Basel II is.

_________________
http://www.shbab1.com/2minutes.htm
الرجوع الى أعلى الصفحة اذهب الى الأسفل
معاينة صفحة البيانات الشخصي للعضو http://islamfin.go-forum.net/forum.htm
 
ISLAMIC FINANCE :THE road to basel2
استعرض الموضوع السابق استعرض الموضوع التالي الرجوع الى أعلى الصفحة 
صفحة 1 من اصل 1

صلاحيات هذا المنتدى:لاتستطيع الرد على المواضيع في هذا المنتدى
منتدى التمويل الإسلامي :: English Section :: Islamic Finance-
انتقل الى: