Jan 28 2010
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QFCA chief debunks Islamic finance myth
DAVOS: It's a myth to assume Islamic finance products are safer than conventional products and underlying risks should be studied more carefully, Qatar's top regulator said yesterday.
Despite being billed as a safer alternative to traditional banking because assets must underpin deals, Islamic bondholders have found they may not have any more legal safeguards than conventional counterparts in the event of default. Such issues were highlighted after sukuk or Islamic bonds had the first ever defaults last year.
"There is some assumption that some of it is cosmetically more comforting, but when so many Islamic instruments are now trying to mimic the effect of conventional products, you need to examine if they carry the same risk profile," Philip Thorpe, chief executive of Qatar Financial Centre Regulatory Authority , said.
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