Luxembourg welcomes establishment of Islamic banks |
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BRUSSELS -- A top banker of Luxembourg a country famous for hosting international financial institutions has said that his country would welcome the establishment of Islamic banks.
"We had Islamic banking institutions in the seventies which discontinued its services and as for now there is no Islamic bank that operates in Luxembourg, but there is no prohibition to have a setup of such an institution, " Yves Mersch, President of the Central Bank of Luxembourg, told KUNA in an interview.
"I would like to stress that the government would welcome such an establishment," he added.
"Since there seems to be an increasing demand for Sharia (Islamic law) compliant finance, Luxembourg as a financial centre is willing to accommodate this demand and make its regulatory environment in compliance with such a need and such a supply which ought to be well regulated," noted Mersch. He was in Brussels to speak at the 5th Economic Forum Belgium-Luxemburg-Arab Countries organized by the Arab-Belgium-Luxemburg Chamber of Commerce (ALBCC) held on Tuesday. The forum was dedicated to the banking sector in general and to the Islamic banking in particular. During his visit to Arab countries, Mersch said he repeatedly heard interest of establishing banking activities in Luxembourg.
"We regularly sent missions led by the economic and finance minister to those Arab countries and we have to see still the first incorporation of new Islamic bank in Luxembourg," he said.
The Luxembourg banker explained that in principle Sharia-compliant finance is not only restricted for Muslims.
"You can also see Sharia-compliant finance as something I would call ethical or principle of social justice and participation and as such it is also following what we would call alternative banking or alternative finance which is similar to what is offered by micro-finance institutions or socially-responsible institutions and as such it also caters for non-Muslims," he said.
Asked if Islamic banking is better equipped to deal with the current economic crisis, Mersch said Islamic finance has some circuit-breakers to excessive leverage and risk taking and because it is also linked to the growth of the real economy it avoids excessive growth which is not based on the real economy and therefore the "Problems that we have seen in the present crisis and which mostly derived from excessive leverage taken on by financial institutions are better controlled in Islamic finance.
"We have also seen certain resilience of Islamic finance during the financial crisis. However, I have to add that Islamic finance is not immune to excessive risk taking as well and needs to be subjected to same amount of regulation," he added.
Commenting on financial relations between Kuwait and Luxembourg, Mersch said there has been regular visits between the two countries on the political level and they are ongoing and during these visits the will for fostering cooperation in the financial area has continuously been stressed.
"I would very much welcome that the implementation of this political will soon show results," he said.
By Nawab Khan
© KUNA (Kuwait News Agency) 2009
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