How to Regulate Islamic Financial Markets and Products, 31 August - 3 September 2010, Clare College

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UPDATED PDF brochure can be downloaded here

Tuesday 31 August 2010

Islamic Finance: global developments and challenges

Opening remarks and participant experience
Simon Gray, Director, Supervision, Dubai Financial Services Board

This session sets the scene for those follow with a review of the key challenges confronting supervisors in their home institutions and the latest international regulatory developments. Delegates will give a brief account of their local regulatory system and explain the most pressing current issues affecting their jurisdiction. This session is an opportunity for delegates to benefit from each other’s expertise and experience in confronting common problems.

The evolution of Islamic finance and key developments
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. In this session, the speaker, a leading authority on the development of Islamic finance, chart the evolution of the sector, identifying recent and longer term trends and significant developments such as the growth of the sukuk market and the potential for takaful in new and existing markets.

The impact of the financial crisis on Islamic finance
Simon Gray, Director, Supervision, Dubai Financial Services Board

It is widely considered that the recent financial crisis has not impacted Islamic finance has to the same degree as conventional finance. While this can be seen as a sign of robustness for the sector, the Islamic Financial Services Board (IFSB), a Kuala Lumpur-based international standards setting body, has highlighted eight building blocks for the industry to focus on in strengthening its risk management and mitigaiton. In this session, the speaker will provide an overview of the eight building blocks and discussion will focus on how they will impact products, markets and their regulation.

Wednesday 1 September 2010

Regulatory considerations for Islamic Finance

Who are the regulators and who is regulated?
Khairul Nizam, Assistant Secretary General, AAOIFI

Islamic finance faces the challenge of not only being regulated by conventional institutions within certain jurisdictions, but also Islamic financial bodies, such as the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organization for Islamic Banking and Finance (AAOIFI). Overlaid with this, is the requirement for scholarly approval for products themselves. This complex framework raises a number of issues for market participants, as well as central bankers and regulators.In this session, the speaker will discuss the critical components and organisations within the regulatory framework for Islamic as well as conventional financial systems. Discussion will focus on examination of how “duel systems” work in practice.

The relationship between Islamic banking and conventional banking
Didier Peny, Director, Licensing, Authorisation and Regulation, Banque de France

A recent report from the Islamic Financial Services Board has outlined concerns that Islamic banking will not be given enough regulatory attention in duel-system states. How are such fears being addressed? France has made significant progress in promoting Islamic banking in its jurisdiction and is looking to license Islamic banking institutions in the near future. In this session, Didier Peny will discuss the approach the Banque de France has taken in implementing Islamic finance in a duel regulatory system and how the central bank has overcome the challenges this presents.

IFSB prudential and supervisory standards
Speaker to be confirmed

Underpinning regulation of Islamic finance today is a range of prudential and supervisory standards developed by the IFSB which has been likened to an Islamic finances equivalent of Basel II. These are derived from bodies including the Basel Committee on Banking Supervision, the International Organisation for Securities Commission and the International Association of Insurance Supervisors, but are subject to different interpretation across jurisdictions across banking, takaful and capital markets. This session, led by the course chairman, will identify why there is a need for a uniformity of governing standards and the ways in which this can be achieved. Discussions will draw on examples from conventional finance for regulatory approaches to the development and implementation of cross-sectoral standards.

Liquidity management
Warren Edwardes, CEO, Delphi Risk Management Limited

The lack of a robust national and international liquidity infrastructure has been a long-standing issue within Islamic finance. The IFSB has highlighted this as a key area in need of reform in order to strengthen the Islamic financial system and have a task force dedicated to the development of such an infrastructure. In this session, the speaker will discuss why there is a need for reform in this area, the current measures being undertaken, and the danger that they could be deemed un-Islamic or Haram, and what the proposed outcomes could be. Group discussion will consider the implications for markets and regulations.

Accounting, auditing and disclosure standards
Khairul Nizam, Assistant Secretary General, AAOIFI

There is widespread acceptance of a need for uniformity in the way Islamic financial institutions report their financial performance. This will assist users of financial reports to better understand Islamic financial institutions positions and help to bring greater transparency to the Islamic finance industry. In this session, Khairul Nizam will discuss international Islamic finance regulatory standards designed to enhance the financial reporting of Islamic financial institutions.

Thursday 2 September 2010

New products and issues

ISDA/IIFM Tahawwut Master Agreement: the key to derivatives?
Richard Tredgett and Yusuf Battiwala, Partner and Associate, Allen and Overy Law Firm

Hailed as a breakthrough for the industry, the Tahawwut Master Agreement is designed to govern the legal and credit relationship between two parties embarking on a bilateral trading relationship involving Shari’a-compliant hedging transactions based on murabaha transactions. As well as bringing efficiency, certainty and liquidity to the Islamic Finance markets, widespread adoption of the agreement should help to reduce systemic risk through strengthening credit risk management. This session will provide an overview of the key features of the agreement and how it differs from similar agreements used in conventional derivatives markets. Particular attention wil be given to the Shari'a-compliant close-out netting provisions of the agreement, which was the main focus of attention of the working group during the development of the document.

The role of credit rating agencies
Nasir Ali Merchant, Acting CEO, Islamic International Rating Agency

Credit rating agencies within Islamic finance have been subject to increasing scrutiny regarding their role in assigning ratings to new and complex securities. In particular they have been asked to fully appreciate the risk profiles of Islamic institutions and instruments. In this session, Nasir Ali Merchant will set out the role of the Islamic International Rating Agency and how its work is aimed at promoting market transparency and mitigating risk. The speaker will also the rating process and the methodology used, as well as assessing the value added role that a rating agency can have in solving some of the most pressing issues in Islamic finance today.

Case study: Developing markets
Andrew Sulston and Yusuf Battiwala, Partner and Associate, Allen and Overy Law Firm

This case-study session will explore recent innovation in the Shari'a-compliant structured products markets – an area that has attracted considerable interest as institutions look to innovate in the Islamic finance markets. The speakers will focus on the key aspects of a Shari'a-compliant certificates programme, exploring in detail the common structures utilised to give investors structured-product type returns in a Shari'a-compliant manner, the key cash flows, how such products are structured to deal with the key risks entailed and how these products can be used to bring liquidity to the market.

Next steps for the Sukuk market
Joelle Gemayel, Research Assistant, Bank of Lebanon

The Dubai debt crisis in 2009 had a negative impact on the Islamic bond market. The six-month standstill on debt announced by state-owned conglomerate Dubai World, including a $3.5 billion sukuk, issued by its real-estate subsidiary Nakheel, sent shockwaves through the industry. A number of issuers defaulting on sukuk within the past year. However markets have since recovered as markets have improved, raising a number of important questions about the resilience of the sector. In this session, the speaker will analyse sukuk market, looking at the impact of the financial crisis, the challenges the market faces as well as the global potential in the sukuk market for investment banks, Islamic banks and securities firms that have participated in the insurance of sukuk.

Friday 3 September 2010

Interpretation and governing standards

Shari’ah legal interpretations across jurisdictions
Humayon Dar, Shari’ah advisor and CEO of BMB Islamic

The harmonisation of Shari’ah advice across jurisdictions is an increasingly pressing topic in Islamic finance. With Islamic financial institutions across jurisdictions turning to numerous Shari’ah scholars, industry increasingly recognises the need to ensure standards are universal in order to effectively strengthen the infrastructure and harmonise practice. In this session, the speaker will discuss the practicalities behind the harmonisation of interpretations as well risk management considerations associated with Shari’ah and legal compliance.

Case study: The DFSA’s approach to regulating Islamic finance
Simon Gray, Director, Supervision, Dubai Financial Services Authority

In this case-study session, the chairman will discuss how the Dubai Financial Services Authority (DFSA) operates and how it regulates Islamic financial institutions. He will highlight key lessons which have been learnt from the DFSA and the Dubai International Financial Centre (DIFC) approach, including a discussion of Islamic windows and wholly Islamic institutions as well as recent changes to the DFSA’s Islamic finance and funds regime. The session will also consider how markets are developing in the Middle East as well as new product products which are being developed. An assessment of the challenges facing Islamic finance in the region as well as new opportunities in the future will also be discussed.

The role of Shari’ah advisory boards
Aly Khorshid, Shari’ah advisor and lecturer at Academy UK

At present there are no rules or regulations governing the actions of Shari’ah advisory boards. As markets expand within and across borders, it is vital key decision makers are held accountable to the public and key shareholders. In this session Aly Khorshid will discuss the issues surrounding accountability within the context of Shari’ah boards, as well as an overview of the tentative steps which have already been taken in this direction.

Lesson learned and action points
Led by the chairman

In this final round-up session, the chairman will revisit some of the key lessons coming out of the presentations and discussions throughout the course. This final workshop session will highlight some the main ideas for further development and reflection, and will bring the course to a close.

Click here to register

Updated PDF brochure can be downloaded here

For more information about this course, send your queries to Aurelie Li at conference@centralbanking.co.uk