In these unprecedented times of low growth, loose monetary policy and European crisis, many investors and issuers are reassessing their current circumstances and capital market expectations. This environment has prompted a "risk-off" mentality, which has seen large sums flow to certain parts of the bond market, particularly those issued by the German and US governments, as well as the dollar-based sukuk market.
The high level of demand for dollar sukuk is also a boon to those seeking debt financing. In the first half of 2012, there has been more than USD 7.7 billion in issuance, when selecting only the more liquid deals with an issue size exceeding USD 100 million. All such deals have featured a fixed profit rate with a tenor of not less than five years, as borrowers wish to lock in the low cost of borrowing for a long period.
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Islamic financial institutions (IFIs) are under a significant degree of pressure to increase their risk management capabilities, as a recent study of IFIs in the GCC and South East Asia from Deloitte's Islamic Finance Knowledge Center found.
Deloitte found that the primary driver of risk management activities (which should include Shariah risk management) within IFIs was regulatory compliance, not public image or compliance with international standards setting organizations like AAOIFI, IIFM or IFSB. Standard setting compliance and public image were listed as fifth and sixth most important, respectively, (out of six) as drivers for risk management by IFIs.
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