Gulf finance house participates in key seminar on Islamic finance in Paris
The global financial crisis has triggered a deeper and more comprehensive scrutiny of banks by regulators working hard to maintain the stability of their financial systems, a speaker from Gulf Finance House (GFH) said at a key seminar in Paris.
Even in jurisdictions such as Bahrain, which have shown considerable resilience in the face of the current turmoil, financial institutions and the Central Bank of Bahrain (CBB) are working much more closely to monitor the effects of the crisis, which continues to unfold and evolve, said Dr Ala’a Al-Yousuf, Chief Economist at GFH.
He was speaking today at a seminar on ‘Islamic Banking, Insurance and Finance in the Kingdom of Bahrain’. The one-day event has been organized by the Embassy of Bahrain in Paris and the Paris Chamber of Commerce and Industry, with GFH as the platinum sponsor.
“The Islamic finance industry, of which GFH is a prominent player, avoided the mess of the subprime crisis, thanks to its strong, asset-backed business models, which are rooted in Islamic principles,” said Dr Al-Yousuf during a session on ‘The supervision of Islamic banking and the role of the CBB’.
“Without doubt, adherence to Islamic principles has stood GFH and other Islamic banks in good stead,” he said.
The ban on interest, speculation, trading debt and complex structured products prevented Islamic financial institutions (IFIs) from investing in the assets that turned toxic for conventional banks. The concept of sharing of risks and profits has also meant that IFIs were inherently more conservative than their conventional counterparts.
“What the current crisis has done is tested the Islamic financial system and revealed its strengths, which are inherent, as well as its vulnerabilities, which stem from its linkages with the global economy and conventional financial system,” said Dr Al-Yousuf.
However, banks based in Bahrain, including the GFH, have so far shown considerable resilience, he noted.
While regulators around the world have been injecting huge amounts of money to bail out some of the world’s largest banks, the CBB has not deemed it necessary to make a similar intervention, despite months of turmoil in the international financial markets.
“This speaks well of the fundamental strength of the banking system in Bahrain, for which some of the credit must go to the regulator for its effective oversight and supervision of its licensees as well as to the banks for implementing effective risk management practices,” said Dr Al-Yousuf.
“In fact, during these trying times, the CBB and the financial services industry are working hand-in-hand to monitor the latest developments and ensure that Bahrain banks remain well prepared to deal with the negative effects of the financial crisis, which continues to evolve and cast a shadow on the financial services industry worldwide.
While the ongoing financial crisis has shattered the light-touch regulation model, regulators around the world now need to develop a formula which strikes the right balance between regulatory oversight and corporate freedom, said Dr Al-Yousuf.
On its part, GFH will continue to source compelling investment opportunities and structure them in accordance with the principles of the Shari’a, for the benefit of its shareholders and investors.
“We intend to maintain our leadership in product development and innovation and to remain at the forefront of the global Islamic banking industry. “With its decade-long experience and recognized expertise, GFH is a natural partner and advisor to foreign markets where Shari’a-compliant financial instruments are experiencing significant demand.”
