New solution to address a variety of regulatory requirements including Basel II compliance

Manama, Bahrain, November 23 2004: The Bahrain-based Gulf Finance House B.S.C., (GFH), one of the leading providers of Islamic investment services, today announced that it has initiated the development of a cutting-edge Islamic risk management system, which will help the bank regularly monitor and assess the risk sensitivity of its investment portfolio and meet regulatory compliance requirements effectively.

Announcing the path-breaking initiative during the Middle East Financial Technology & Conference (MEFTEC), senior GFH officials said that the risk management solution will be developed jointly with the bank's technology partner, the Kuwait-based vendor of integrated Islamic software, Path Solutions. GFH's core banking system runs on iMal, which is the industry-leading integrated Islamic banking software from Path Solutions.

Commenting on the imperative of having adequate risk management tools in an age of increasing market complexity and regulatory requirements, Mr. Esam Janahi, Chief Executive Officer, GFH said: "By developing a risk management system that caters to a Sharia'h-compliant banking regime, we believe we are taking a pioneering step. It is becoming increasingly imperative that Islamic financial institutions put in place risk management systems that address the unique characteristics of the  industrythe industry."

"What we are looking at in the new risk management system is a whole host of advanced and integrated features.  We expect the system to have the capability not only  toonly to address compliance and regulatory requirements but also to  helpto help us in creating value for our shareholders and investors by efficient management of our on and off balance sheet risks," hehe said.

He added that innovation was an integral part of the business philosophy of GFH and the move to develop a customized risk management system was another testimony to this.

Speaking on the new risk management system, Mr. Silvan Varghese, the Head of Risk Management of  GFHof GFH said: "The risk characteristics of Islamic banks are unique. Apart from exposure to the risks that are faced by conventional banks, Islamic banks face additional risks as a result of the  Sharia'hthe Sharia'h-compliant nature of their business. What we intend to do is to use current techniques available and customize them to meet requirements of Islamic Banks in general and GFH in particular."

He said GFH will be developing the risk management system on iMal platform which currently has a data warehouse and Business Intelligence (BI) module which meet some of GFH's reporting and monitoring requirements. "We plan to work with regulatory agencies and other monitoring bodies to develop the new risk management system as a standard- bearer for the industry as a whole," Mr. Varghese said.

Among a host of features, the new risk management system will have a facility management and monitoring system, collateral and document management system, internal rating methodologies for investments & credit,  measurement, measurement and monitoring system for balance sheet risks and modules  formodules for economic capital allocation, Value at Risk (VAR) and Earning at  Riskat Risk (EAR), stress analysis etc. The system will also meet reporting requirements under Basel II.

Commenting on the partnership to develop the risk management system,   Mr, Mr. Naji Moukadam, Executive Vice President (Development), Path Solutions, said: "We are extremely proud to be asked to develop a pioneering, industry-leading risk management system that serves the special nature of the Islamic finance and banking industry. Islamic finance and banking in general is waking up to risk management and we are confident that the new tool we will develop jointly with GFH will be a first-of-its-kind in the industry."

-Ends-

Notes to the Editors:
Gulf Finance House B.S.C
Established five years ago, Gulf Finance House B.S.C (GFH) has rapidly earned a reputation as a leading-edge player in Islamic banking. GFH has a paid-up capital of $135 million and authorized capital of $300 million.  It is committed to the Islamic Sharia philosophy of wealth management and this directs its innovation and shapes the structure of its investment products. GFH is dedicated to providing clients with carefully selected investment opportunities that balance risk with reward. It leads the drive to establish an Islamic investment banking industry that dovetails with regional development. Consequently, GFH has since inception striven to offer investment opportunities in the countries where it operates so as to further their economic and social development. It aims to capitalize on the increasing willingness of Islamic investors to back local and regional business projects and opportunities and to take advantage of the wave of reforms initiated by GCC governments to diversify and liberalize their economies.  This is balanced by enabling clients to diversify risk by offering them investment opportunities outside the region. This philosophy is reflected in GFH's investment portfolio that includes major projects such as Bahrain Financial Harbour, Lebanon's Arab Finance House, Solidarity -Takaful life assurance, annuity savings, and short-term insurance; Bahrain's Royal University for Women, menaJet - low-cost airline for the region,  and leading international franchises. 

For further details contact:
Jayakrishnan B/ Freeda D'souza/Ali Smadi
Percept Profile Gulf
+9714 3446373 (T)
+9713 3429158 (F)
E-mail: info@perceptprofilegulf.com

© Press Release 2004