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Basel III Al Baraka complies with capital adequacy requirement.

KARACHI -- The General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella organization for Islamic financial institutions, held a successful Infocus session on Basel III and Islamic banks during the 21st World Islamic Banking Conference (WIBC) in Manama, Kingdom of Bahrain.

The three prominent Islamic banks, Islamic International Arab Bank, Al Baraka Banking Group, and Bank of Khartoum, showed that they currently have sufficient levels of capital, far beyond what is required under Basel III.

Al Baraka Banking Group's recent issuance of Tier1 Basel IIIcompliant Sukuk in Pakistan reflects the Group's desire to position itself to adapt positively to the dynamic nature of regulatory regimes in the years ahead rather than any shortage of capital.

The objective of Basel III requirements is to ensure the stability and resilience of financial systems in response to the global financial crisis through addressing some of the limitations in Basel II.

Key areas where Basel II builds in Basel III include the redefinition of capital, broader risk coverage, and the creation of a macroprudential overlay through a Counter Cyclical Buffer; introducing liquidity requirements such the Liquidity Coverage Ratio (LCR) and the net Stable Funding Ratio (NSFR); and strengthening other areas of banks' operations such as governance, risk management, pay and incentives, risk concentration, and offbalance sheet exposures.

The fundamental impact of Basel III on Islamic banks will vary across countries.

While Basel III set higher capital requirements for tradingrelated counterparty risks, the impact of the stronger liquidity standards on Islamic banks is expected to be minimal due to their limited use of derivatives and securitizations and the already strong capital position enjoyed by most Islamic banks.

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Publication:Frontier Post (Peshawar, Pakistan)
Geographic Code:9PAKI
Date:Dec 20, 2014
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