Monday, May 27, 2013

More IDB sukuk will complement IILM short-term sukuk for liquidity management and compliance with Basel III rules

Islamic banks are continually in need of new avenues for liquidity management, and will also be required to adhere to Basel III’s stringent standards on the liquid assets they must hold.  The IILM is a step in providing an asset that can meet these requirements.  However, it is unlikely to be able to do so in sufficient size at least for the near-term.  Providing more supply of IDB sukuk—more likely now that the institution is expanding its authorized capital—can help provide a supplemental source of liquidity management products (via Islamic repo) while also providing an asset likely to be recognized as a HQLA for the purpose of Basel III.

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