Wednesday, February 25, 2009

Mid-week update

Although Islamic banks are not experiencing write-downs connected to derivatives products, they are experiencing significant losses from falls in the real estate markets, particularly in the GCC. S&P estimates that Islamic banks have nearly 20% of their assets backed by real estate.

UK Trade & Investment and the central bank of Malaysia, Bank Negara, signed a Memorandum of Understanding to work together to promote the global Islamic finance industry. Malaysian central bank governor Dr. Zeti Akhtar Aziz commented on the MoU to Malaysian paper The Star.

Islamic banks in the GCC are likely to go through a round of consolidation that will create larger, better capitalized institutions according to the head of AAOIFI.

Gatehouse Bank, one of the newest Islamic wholesale banks in the UK is closing its first deal. According to CEO David Testa, it will be "a built property with a very strong tenant in continental Europe. It is a refinance deal connected to a governmental entity". There is less interest in general in promoting Islamic finance among governments in continental Europe than in the UK although the French government said it was exploring regulatory and legal changes to put Islamic finance on a level playing field with conventional finance.

Daud Vicary Abdullah, a specialist in Islamic finance at Deloitte in Malaysia says the industry will grow by double digits in the next few years as it experiences rapid growth in Muslim-minority countries.

Reliance Capital, India's largest asset manager, is going to base its Islamic finance unit in Malaysia.

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