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CBB's governor: Islamic financial institutions to adopt good risk managment
08 : 46 PM - 23/10/2011
Manama: October 23 -- (BNA) The Central Bank of Bahrain’s (CBB’s) governor Rasheed Al-Mi’raj called on Islamic financial institutions to learn from the experience of conventional banking institutions from the international financial crunch, increase understanding, monitor and even control, risks of liquidity, and cautioned them against the repercussions of succumbing to the same conventional financial mismanagement of short-term financial markets instrument

Mr. Al-Mi’raj said in his speech as he patronized today the sessions of the 3rd Islamic Finance and Banking Conference for the Accountancy and Auditing Authority for Islamic Financial Institutions (AAOIFI) in cooperation with the World Bank and the Central Bank of Bahrain that chiming of the bell after the shortage in liquidity and inability to offset losses incurred in the conventional financial industry has come too late and that the Islamic financial industry should beware of the need for good liquidity and risks management . Al-Mi’raj emphasized the need for Islamic financial institutions to adopt transparent mechanisms on methods of disclosing their financial statements, seasonal and annual results in clear understandable manner. He explained that during recent years, the Accountancy and Auditing Authority of the Islamic Financial Institutions (AAOIFI) struggled to adapt with international standards and at the same time pursue the Islamic financial industry’s needs, citing that adapting to international standards does not mean neglecting the principles of transparency and appropriate disclosure and auditing. He said that the Central Bank of Bahrain was at the forefront to resort to creative thinking in the area of assistance to help Islamic financial institutions manage their liquidity. However, a lot has to be done by legislatures and financial institutions, too. He added that this needs lengthy time in order to ensure the Islamic financial industry’s acquisition of sturdy foundations to enable building onto them for a better future, and, that the legislatures in the Islamic financial institutions should consider very well the ability of restructuring of capital funds in order to absorb losses permanently and constantly. Regarding the enforcement of Basel-3 standards agreement for sufficiency of funds for Islamic financial institutions, Al-Mi’raj said: “There are practical difficulties for the implementation of the Basel-3 standards on the Islamic financial institutions. However, these banks should be aware of the need to take the issue of liquidity risks seriously in the same manner as conventional banks, and must ensure that the rates of risk should remain within reasonably acceptable limits. The Islamic banking and financial business conference is an international platform which considers the needs and requirements of Islamic financial institutions all over the globe. In addition to that, the conference addresses the various issues of importance to the Islamic financial sector which is experiencing constant growth. Tens of experts and officials participate in the conference functions from all over the world in the field of Islamic banking industry. The participants discuss a number of important themes for instance: enforcement of IFRS standards in Islamic banking, the need for continuity of Sharia control boards in the financial institutions, the extent of the success of REIT in Islamic banking, restructuring and performance, and the extent of success of using Islamic banking in financing international business operations (for products and instruments), the challenges and difficulties of enforcing of Basel-3 standards in Islamic financial institutions, and the apportionment of excess to shareholders in Takaful companies. On the other hand, the chairman of the board of trustees of the Accountancy and Auditing Authority for Islamic financial institutions Shaikh Ebrahim bin Khalifa al Khalifa said: “the Authority intends to develop new accountancy standards for investment portfolios accounts, in addition to developing revised accountancy criteria for real estate investment in order to provide additional guidelines regarding issues pertaining to accountancy classification of investment in real estate and the method of addressing assets under construction and boost the requirements for disclosures. Shaikh Ebrahim bin Khalifa Al Khalifa explained that deliberations during previous years’ conferences contributed to a great extent in setting the Authority’s standards and that until now 86 standards have been issued in the fields of accountancy and auditing and professional ethics, institutional governance and Sharia standards. On the other hand, the secretary-general of the Accountancy and Auditing Authority for Islamic Financial Institutions (AAOIFI) Dr. Mohammed Al-Sha’ar emphasized that the Authority will continue to design a new system of ethics and justice, citing that more than 90 standards were issued in order to control Sharia-compliance through engaging of a number of professional bankers.He also said that the Kuwait Finance House (KFH-Bahrain) has always been keen on supporting these important conferences which enrich Islamic financial business through discussion of topics pertaining to the industry. Also, the conference provides the an important form for gathering and discussing the various issues between the participants and specialists from the Islamic banking and financial institutions.

On the other hand, Bahrain Islamic Bank's CEO Mohammed Ebrahim hailed the huge role underaken by AAOIFI in organizing the prestigious conference.


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