THE ARAB MONETARY FUND PUBLISHES A STUDY "IMPLEMENTING SHARIAH-COMPLIANT BANKS WITH BASEL III REQUIREMENTS"

by **claud39** Thu Jul 16, 2020 11:24 am

THE ARAB MONETARY FUND PUBLISHES A STUDY "IMPLEMENTING SHARIAH-COMPLIANT BANKS WITH BASEL III REQUIREMENTS"

2020-07-15

Shariah-compliant banks' implementation of Basel III requirements in Arab countries faces challenges related to the limited financial instruments and high-quality Sharia-compliant assets

Sharia-compliant banks tend to use standardized approaches to measure risks and there is a need to develop the capabilities of these banks to adopt advanced approaches to risk measurement

The tendency of some central banks to issue instructions that take into account the privacy of banks that comply with Islamic law with regard to stress tests

The necessity of continuing supervisory efforts to enable Shariah-compliant banks to adhere to international banking

standards and qualify them to be aware of various risks and develop Sharia-compliant stock markets

In the context of the Arab Monetary Fund’s endeavor to prepare research contributions in line with the priorities of its member states and support policymakers, the Fund issued a study titled “Application of Shariah-Compliant Banks to Basel III Requirements .” The study indicated that the Arab countries are considered the most important centers of banking finance that are compatible with the Sharia, as they account for nearly 51 percent of the industry’s volume worldwide, according to the latest data issued by the Islamic Financial Services Council. Seven Arab countries.

The study showed that the central banks and Arab monetary institutions were keen to keep abreast of international developments related to the adoption of the requirements of the Basel Committee for Banking Supervision (Basel III ), including those related to capital adequacy for banks compatible with Sharia, and some of them issued and / or applied those requirements. The study indicated that Sharia-compliant banks face some challenges in meeting the capital requirements in the framework of the new requirements of Basel III . These challenges vary from one country to another, but they share some elements, including that Shariah-compliant banks are subject to the same regulatory instructions that conventional banks are subject to in a number of Arab countries, with challenges related to insufficient Shariah-compliant financial instruments that can be included within head components Money, in addition to the challenges associated with compliance with international accounting standards.

Central banks and Arab monetary institutions are making strenuous efforts to overcome the challenges facing Shariah-compliant banks and enabling them to face the challenges associated with calculating capital components in the framework of Basel III decisions and aligning their products with regulatory instructions, and work to complete the regulatory frameworks so that they can allow the issuance of tools appropriate to Basel decisions III and comply with Shari'a instructions.

On the other hand, the study indicated that the central banks and Arab monetary institutions seek to make parallel efforts to enable Shariah-compliant banks to calculate the three main types of risks: credit risks, market risks, and operating risks. Although the standards of the Basel Committee on Banking Supervision allow the use of a variety of approaches specific to each type of risk, banks that comply with Sharia in the Arab countries tend to use the standard approaches and to a lesser degree the basic approaches, which are the easiest possible ways to measure risks, and there is no doubt that It is a long-term challenge, as the capabilities of these banks must be developed to adopt advanced approaches to measuring risks.

The study showed that a limited number of Arab central banks calculate the credit gap for the purpose of using the capital margin tool to counter periodic fluctuations ( Countercyclical Capital Buffer (CCyB) ). The application of this requirement has had an important role in reducing the levels of vulnerability of financing granted by Shariah-compliant banks to fluctuations in business cycles. There is no doubt that the use of this margin is necessary according to what the global financial crisis 2008 showed, and its importance has increased in the context of the current conditions resulting from the Corona virus pandemic. The newbie.

On the other hand, the study indicated that a number of central banks and Arab monetary institutions face challenges with respect to meeting the requirement of liquidity coverage ratio according to the requirements of Basel III, the most important of which is the lack of high-quality assets that are compatible with the Sharia in the same way as Sukuk according to the definition contained within the requirements of Basel. In order to overcome the challenges mentioned above, a number of central banks issued securities that comply with Islamic law. On the other hand, the central banks and Arab monetary institutions, in cooperation with the concerned authorities in a number of Arab countries, made efforts to develop a stock market compatible with Sharia.

With regard to the second pillar of Basel III , the study showed that Shariah-compliant banks follow the same regulatory instructions as conventional banks in this regard in a number of Arab countries. While the central banks in some Arab countries have directed to issue instructions that take into account the privacy of banks that comply with Islamic law with regard to partial stress conditions tests, while central banks in the rest of the countries are working to complete the issuance of this framework. Sharia in a number of Arab countries.

With regard to the third pillar of Basel III , Shariah-compliant banks in Arab countries adopt standards of disclosure and transparency in the framework of good governance that are appropriate to their business and activities in accordance with the developments surrounding them through the commitment to provide accurate, reliable and updated information to shareholders, in accordance with regulatory and legislative requirements within a transparent framework In light of a number of Arab central banks issuing the regulatory framework for market discipline regulating the process of disclosure (financial, non-financial and regulatory disclosures that include all important data related to it and its financial operations and performance in general) that often depend on the same framework applied to traditional banks.

In light of the above, the study concluded some recommendations regarding enabling Sharia-compliant banks to fulfill Basel III requirements as follows:

Continuing the supervisory efforts made to enable Shariah-compliant banks to adhere to international banking standards and provide appropriate legislation for the Sharia-compliant banking pattern that is commensurate with the nature of their activity to ensure effective oversight by the supervisory authorities.
Strengthening and qualifying human cadres to oversee various risks, and developing their capabilities in this field; Spread a culture of sound risk management at all levels and adhere to best practices in the banking industry.
Developing risk measurement tools and systems according to the internal evaluation methods, to take advantage of the advantages of this method.
Consolidate efforts to ensure that Shariah-compliant banks adhere to adhere to the Islamic Financial Services Council formulas to reach a unified formula for their application.
The necessity to keep abreast of international developments and best practices, especially issued by the Islamic Financial Services Council and the Accounting and Auditing Organization for Islamic Financial Institutions.
Effective oversight of the risk of non-compliance with Sharia rules .
Continuing efforts to develop Sharia-compliant stock markets to enable these banks to meet liquidity requirements and provide financial tools to ensure efficient liquidity management in these banks on the one hand and enable central banks to manage monetary policy more effectively, especially in countries where these banks are of systemic importance.

The full version of the study is available at this link

https://www.amf.org.ae/ar/study/study-application-banks-comply-sharia-requirements-basel-arab-countries

https://www.amf.org.ae/ar/content/%D8%B5%D9%86%D8%AF%D9%88%D9%82-%D8%A7%D9%84%D9%86%D9%82%D8%AF-%D8%A7%D9%84%D8%B9%D8%B1%D8%A8%D9%8A-%D9%8A%D9%8F%D8%B5%D8%AF%D8%B1-%D8%AF%D8%B1%D8%A7%D8%B3%D8%A9-%D8%AA%D8%B7%D8%A8%D9%8A%D9%82-%D8%A7%D9%84%D8%A8%D9%86%D9%88%D9%83-%D8%A7%D9%84%D9%85%D8%AA%D9%88%D8%A7%D9%81%D9%82%D8%A9-%D9%85%D8%B9-%D8%A7%D9%84%D8%B4%D8%B1%D9%8A%D8%B9%D8%A9-%D9%84%D9%85%D8%AA%D8%B7%D9%84%D8%A8%D8%A7%D8%AA-%D8%A8%D8%A7%D8%B2%D9%84-iii

by **claud39** Thu Jul 16, 2020 11:28 am

The Arab Monetary Fund publishes a study “The application of banks that comply with the Sharia requirements of Basel”

-16/07/2020

THE ARAB MONETARY FUND PUBLISHES A STUDY "IMPLEMENTING SHARIAH-COMPLIANT BANKS WITH BASEL III REQUIREMENTS" %D8%B5%D9%86%D8%AF%D9%88%D9%82-%D8%A7%D9%84%D9%86%D9%82%D8%AF-%D8%A7%D9%84%D8%B9%D8%B1%D8%A8%D9%8A-%D9%8A%D9%8F%D8%B5%D8%AF%D8%B1-%D8%AF%D8%B1%D8%A7%D8%B3%D8%A9-%D8%AA%D8%B7%D8%A8%D9%8A%D9%82-%D8%A7%D9%84%D8%A8%D9%86%D9%88%D9%83-%D8%A7%D9%84%D9%85%D8%AA%D9%88%D8%A7%D9%81%D9%82%D8%A9-%D9%85%D8%B9-%D8%A7%D9%84%D8%B4%D8%B1%D9%8A%D8%B9%D8%A9-%D9%84%D9%85%D8%AA%D8%B7%D9%84%D8%A8%D8%A7%D8%AA-%D8%A8%D8%A7%D8%B2%D9%84

In the context of the Arab Monetary Fund’s endeavor to prepare research contributions in line with the priorities of its member states and to support policymakers, the Fund issued a study entitled “Application of Shariah-Compliant Banks to Basel III Requirements.”

The study indicated that the Arab countries are considered the most important centers of bank financing that are compatible with the Shariah, as they account for nearly 51 percent of the industry’s volume worldwide, according to the latest data issued by the Islamic Financial Services Council. Seven Arab countries.

The study showed that the central banks and Arab monetary institutions were keen to keep abreast of international developments related to the adoption of the requirements of the Basel Committee for Banking Supervision (Basel III), including those related to capital adequacy for banks compatible with Sharia, and some of them issued and / or applied those requirements.

The study indicated that Sharia-compliant banks face some challenges in meeting the capital requirements in the framework of the new requirements of Basel III. These challenges vary from country to country, but they share some elements, including the Sharia-compliant banks

They are subject to the same regulatory instructions that conventional banks are subject to in a number of Arab countries, with challenges related to insufficient financial instruments that are compatible with Sharia and that can be included within the capital components, in addition to the challenges that are associated with compliance with international accounting standards.

Central banks and Arab monetary institutions are making strenuous efforts to overcome the challenges facing Shariah-compliant banks and enabling them to face the challenges associated with calculating capital components in the framework of Basel III decisions and aligning their products with regulatory instructions, and work to complete the regulatory frameworks so that it can allow the issuance of tools appropriate to Basel III decisions And comply with the Sharia instructions.

On the other hand, the study indicated that the central banks and Arab monetary institutions seek to make parallel efforts to enable Shariah-compliant banks to calculate the three main types of risks: credit risks, market risks, and operating risks.

Although the standards of the Basel Committee on Banking Supervision allow the use of a variety of approaches specific to each type of risk, banks that comply with Sharia in the Arab countries tend to use the standard approaches and to a lesser degree the basic approaches, which are the easiest possible ways to measure risks, and there is no doubt that It is a long-term challenge, as the capabilities of these banks must be developed to adopt advanced approaches to measuring risks.

The study showed that a limited number of Arab central banks calculate the credit gap for the purpose of using the capital margin tool to counter periodic fluctuations (Countercyclical Capital Buffer (CCyB)). The application of this requirement has had an important role in reducing the levels of funding granted by Shariah-compliant banks to fluctuations in business cycles. There is no doubt that the use of this margin is necessary according to what the global financial crisis 2008 showed, and its importance has increased in the context of the current conditions resulting from the Corona virus pandemic. The newbie.

On the other hand, the study indicated that a number of central banks and Arab monetary institutions face challenges with respect to meeting the requirement of liquidity coverage ratio according to the requirements of Basel III, the most important of which is the lack of high-quality assets that are compatible with the Sharia in the same way as Sukuk according to the definition contained within the requirements of Basel.

In order to overcome the challenges mentioned above, a number of central banks issued securities that comply with Islamic law.

On the other hand, the central banks and Arab monetary institutions, in cooperation with the concerned authorities in a number of Arab countries, made efforts to develop a stock market compatible with Sharia. As for the second pillar of Basel III, the study showed that banks are Sharia-compliant.

The same regulatory instructions for conventional banks are followed in this regard in a number of Arab countries.

While the central banks in some Arab countries tended to issue instructions that take into account the privacy of banks that comply with the Sharia.

With regard to partial stress conditions tests, while central banks in other countries work to complete the issuance of this framework, there is complemented by that of a regulatory body specialized in supervising Shariah-compliant banks in a number of Arab countries.

With regard to the third pillar of Basel III, Sharia-compliant banks in Arab countries adopt disclosure and transparency standards within the framework of good governance that are appropriate to their business and activities in accordance with the developments surrounding them by committing to providing accurate, reliable and up-to-date information to shareholders.

This is in accordance with the regulatory and legislative requirements within a transparent framework in light of the number of Arab central banks issuing the regulatory framework for market discipline regulating the disclosure process (financial and non-financial and regulatory disclosures that include all important data related to it and its financial operations and performance in general).

https://uabonline.org/%d8%b5%d9%86%d8%af%d9%88%d9%82-%d8%a7%d9%84%d9%86%d9%82%d8%af-%d8%a7%d9%84%d8%b9%d8%b1%d8%a8%d9%8a-%d9%8a%d9%8f%d8%b5%d8%af%d8%b1-%d8%af%d8%b1%d8%a7%d8%b3%d8%a9-%d8%aa%d8%b7%d8%a8%d9%8a%d9%82-%d8%a7/

by **claud39** Thu Jul 16, 2020 11:49 am

Here is a nice example of the importance that the central bank of Iraq has about working closely, and also the private banks with the Arab monetary fund, for helping them to return to the international !!

Claud (Moose)

Arab Monetary Fund: Cooperation with the Iraqi Private Banking Association will be greater in the future

05/11/2018

Economy News - Baghdad

The Arab Monetary Fund confirmed in its first visit to Iraq in 30 years that its cooperation with the Association of Iraqi Private Banks "will be greater" in the future, and while he pointed to the multiplicity of reasons for the weak rate of financial inclusion in the Arab countries, he considered that Iraq is ready to start in the field of financial inclusion.

"The Arab Monetary Fund visited Baghdad at the head of a mission with the participation of a number of institutions such as the World Bank, the German Development Agency and the Global Alliance for Financial Inclusion to provide Technical assistance in the area of financial inclusion, and we are happy to work with the Central Bank of Iraq, "noting that" the governor of the Central Bank, Ali Al-Alaq, has a wise leadership and an important role in the issue of financial inclusion. "

Al-Hamidi added, "The visit of the Arab Monetary Fund to Baghdad is the first since 1988, and from today on, the fund will work with the rest of the Arab financial institutions with Iraq and will play its role as required," noting that "the Central Bank of Iraq has a holistic view of the financial inclusion project."

The head of the Fund’s Board of Directors continued, “The aim of the visit and meeting with the concerned authorities is to draw a general framework for financial inclusion and then submit it to the Central Bank of Iraq, and then set indicators to achieve progress, and a report will not be submitted and then it will end, but there will be visits and reports Follow-up and working alongside the Iraqi authorities to implement what will come in the issue of financial inclusion, and we look forward in the coming years to announce what we have reached as a result of this technical aid. "

And Al-Hamidi said, "Iraq possesses the most important infrastructure represented in human resources, because Iraqi competencies are known on the Arab and international levels in the financial and banking fields, and this is more important than other infrastructure and capable of building the structures that it lacks," noting that "Iraq is ready to start in The area of financial inclusion is not lacking in this regard. "

Al-Hamidi said, "The percentage of financial inclusion in the Arab regions according to a report prepared by international institutions is 12%, but the Arab Monetary Fund designed a survey distributed to the Arab countries consisting of 5 main components, and after the survey is completed the results will be announced, and I expect that the results will be This questionnaire is different from the results announced by international institutions, as it is a general questionnaire that did not specialize in Arab countries, unlike the Arab Monetary Fund questionnaire.

Al-Hamidi pointed out, "The reasons for the weak percentage of financial inclusion in the Arab countries are due to a variety of reasons, including that the financial sector in the Arab countries is incomplete, but the existing in these countries is the banking sector only, while the rest of the components of the financial sector are in the process of growth, on the basis of For example, insurance companies, financial leasing companies, and insurance companies, and therefore it is not possible to achieve a high rate of financial inclusion without the rest of the components of the financial sector, in addition to that is access to finance and I think it is an issue that needs to use modern financial technologies. "

And Al-Hamidi said, “On the sidelines of the meetings, we met with a number of Iraqi private banks and found that they are ready to start and have the ability and desire.” Regarding “I thank the Iraqi Private Banking Association, which had a great role in this visit and honored us with the Association team and we visited their headquarters and we understood from them the nature of their work and their role In the Iraqi economy, cooperation with the Association of Banks in the future will be greater and a greater role for Arab banks in Arab, regional and international groupings.

Al-Hamidi said, "The Arab Monetary Fund is optimistic about the growth of the non-oil sector in Iraq in the coming year and the years that follow."

Al-Hamidi concluded his speech to Al-Iqtisad News by saying, "We were honored today to come to Iraq after those years, and I can assure you that it will not be the last, but multiple visits during each year through other initiatives, setting up workshops and technical assistance in the economic fields, building capabilities, participating in conferences and establishing High-level meetings. "

http://economy-news.net/content.php?id=14257