Monday, May 20, 2013

Basel’s disproportionate impact on Islamic banks

New Basel III rules on the liquidity buffer will significantly and disproportionately affect Islamic banks because of the shortage of assets that meet the high-quality liquid assets (HQLA) requirement under the new rules. A better solution would be to recognize the challenges that Islamic banks face that conventional banks do not and allow them to hold short-term sovereign sukuk as Level 1 HQLA, even where those sukuk would not otherwise be classified as Level 1 assets.

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