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The IFSB and the European Central Bank jointly organised Workshop on Islamic Finance in Frankfurt, Germany

Kuala Lumpur, 3 February2012 - The Secretary-General of the Islamic Financial Services Board (IFSB), Jaseem Ahmed noted that progressive transformations in theIslamic financial services industry over the last few decades have led to theindustry's greater integration into the global financial system. "Islamicfinance shares with Europe a collectiveinterest in cross-border cooperation, in regional cooperation, and in greaterintegration with the global economy." Against the backdrop of the global crisishe further noted that "The expansion in Islamicfinance and the changes in the global regulatory environment in recent yearsunderscore the need for strengthened risk management within institutionsoffering Islamic financial services. These institutions face a unique set ofrisks. In addition, they frequently operate in environments in which marketsand the wider infrastructure of liquidity and risk management are still undergoingdevelopment. Risk management and monetary control are critical issues inIslamic finance and there can be no complacency in this regard. While much hasbeen achieved, much more needs to be done."

Jaseem was speaking at a Workshop on IslamicFinance, jointly organised by the IFSB and the European Central Bank (ECB) in Frankfurt on 26 January 2012. The Workshop aimed to provide an overview of the Islamic financial services industry and provide empirical evidence on theimpact of Islamic finance on financial stability. It also discussed the interaction of Islamic and Western financial systems.

The Workshopbrought together 60 participants from among senior financial sectorsupervisors, market players and academicians discussing, among other things:

a) Latest overview of the Islamic financial services industry and its developmental considerations;

b) The value proposition of Islamic finance in Europe;

c) Challenges facing the industry, especially where the countries are new to Islamic finance;

d) Comparative research on the risk analysis, business model, stability and efficiency of Islamic and conventional banks; and

e) Lessons learned from crisis and the recent development in global regulatory reforms, aswell as how Islamic finance interacts with conventional finance.

European supervisory agencies expressed interest inIslamic finance at the Workshop while highlighting the challenges faced in their jurisdictions in terms of the need for greater standardisation, greater public awareness and better understanding of issues related to Shari`ah compliance. It was also highlighted that in such jurisdictions, the industry may face different expectations from investors and shareholders. With regard to regulatory challenges, the Workshop discussed issues emerging from the Basel III framework such as regulatory capital. The comparative research findings presented also revealed the stability of Islamic banks over its conventional counterparts andfurther suggested that this was strongly linked to higher capital ratios, andbetter quality capital, held by Islamic banks. However, while Islamic bankswere found to be more resilient to local or national crises, the research papers suggested that a global crisis would affect Islamic and conventional banks equally. Given the interest ofthe ECB and its member institutions in the subject, it was agreed to pursue further opportunities for collaboration on Islamic finance.

- Ends -

NOTE TO EDITOR:
About the Islamic Financial Services Board (IFSB)
The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuingglobal prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSBalso conducts research and coordinates initiatives on industry-related issues,as well as organises roundtables, seminars and conferences for regulators andindustry stakeholders. Towards this end, the IFSB works closely with relevantinternational, regional and national organisations, research/educationalinstitutions and market players.

The members of the IFSB comprise regulatory andsupervisory authorities, international inter-governmental organisations and market players, professional firms and industry associations.

For more information about the IFSB, please visit www.ifsb.org.

© Press Release 2012