Shariah Capital Markets

The End of the Financial World as We Know It

2009-01-07T18:33:00.000-05:00

http://www.linkedin.com/in/iahmed

The End of the Financial World as We Know It

By MICHAEL LEWIS and DAVID EINHORN Published: January 3, 2009

AMERICANS enter the New Year in a strange new role: financial lunatics. We’ve been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet’s college graduates seemed to want nothing more out of life than a job on Wall Street.

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don’t know what they are doing with money, who does?

Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?

-----OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

The credit-rating agencies, for instance.

Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages. But their most costly mistake — one that deserves a lot more attention than it has received — lies in their area of putative expertise: measuring corporate risk.

Over the last 20 years American financial institutions have taken on more and more risk, with the blessing of regulators, with hardly a word from the rating agencies, which, incidentally, are paid by the issuers of the bonds they rate. Seldom if ever did Moody’s or Standard & Poor’s say, “If you put one more risky asset on your balance sheet, you will face a serious downgrade.”

The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

-----Indeed, one of the great social benefits of the Madoff scandal may be to finally reveal the S.E.C. for what it has become.

Created to protect investors from financial predators, the commission has somehow evolved into a mechanism for protecting financial predators with political clout from investors. (The task it has performed most diligently during this crisis has been to question, intimidate and impose rules on short-sellers — the only market players who have a financial incentive to expose fraud and abuse.)

The instinct to avoid short-term political heat is part of the problem; anything the S.E.C. does to roil the markets, or reduce the share price of any given company, also roils the careers of the people who run the S.E.C. Thus it seldom penalizes serious corporate and management malfeasance — out of some misguided notion that to do so would cause stock prices to fall, shareholders to suffer and confidence to be undermined. Preserving confidence, even when that confidence is false, has been near the top of the S.E.C.’s agenda.

-----The commission’s most recent director of enforcement is the general counsel at JPMorgan Chase; the enforcement chief before him became general counsel at Deutsche Bank; and one of his predecessors became a managing director for Credit Suisse before moving on to Morgan Stanley. A casual observer could be forgiven for thinking that the whole point of landing the job as the S.E.C.’s director of enforcement is to position oneself for the better paying one on Wall Street.

-----And here’s the most incredible thing of all: 18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change that, or any of the other bad incentives that led us here in the first place.

SAY what you will about our government’s approach to the financial crisis, you cannot accuse it of wasting its energy being consistent or trying to win over the masses. In the past year there have been at least seven different bailouts, and six different strategies. And none of them seem to have pleased anyone except a handful of financiers.

------In the middle of all this, Treasury Secretary Henry M. Paulson Jr. persuaded Congress that he needed $700 billion to buy distressed assets from banks — telling the senators and representatives that if they didn’t give him the money the stock market would collapse. Once handed the money, he abandoned his promised strategy, and instead of buying assets at market prices, began to overpay for preferred stocks in the banks themselves. Which is to say that he essentially began giving away billions of dollars to Citigroup, Morgan Stanley, Goldman Sachs and a few others unnaturally selected for survival. The stock market fell anyway.

It’s hard to know what Mr. Paulson was thinking as he never really had to explain himself, at least not in public. But the general idea appears to be that if you give the banks capital they will in turn use it to make loans in order to stimulate the economy. Never mind that if you want banks to make smart, prudent loans, you probably shouldn’t give money to bankers who sunk themselves by making a lot of stupid, imprudent ones. If you want banks to re-lend the money, you need to provide them not with preferred stock, which is essentially a loan, but with tangible common equity — so that they might write off their losses, resolve their troubled assets and then begin to make new loans, something they won’t be able to do until they’re confident in their own balance sheets. But as it happened, the banks took the taxpayer money and just sat on it.

http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html?pagewanted=1&_r=2&emc=eta1

2008-12-29T09:33:00.002-05:00

From the London Irvine Report - December 29, 2008

Subscribe Link: http://www.globalprofiles.net/about.asp?page_id=4&n=5

"The old Greenspan gambling system’s dead, but until we know the full scale of the losses we can’t begin to build the replacement says Liam Halligan. Does anyone really know the true derivatives position of JP Morgan Chase or Goldman Sachs? How much are the Fed, the ECB, the BOE and BOJ, really on the hook for? How much gold is really left in the central bank vaults, rather than double counted and “leased” into the market never to be seen again? Until the bankers and politicians get some old time religion and honesty, the fiat problem will just keep growing until the bankruptcy of us all."

-----with the result that write-downs in the global financial system to date have reached $993.9 billion, against $919 billion in capital — which is to say that the entire global financial system is insolvent, except for Fed bailouts. Bloomberg (the professional service, not the publicly available news) has done the numbers, and they are impressive. Freddie Mac had $56 billion of writedowns against $15.6 billion of capital, Freddie Mac had $58.4 billion of losses against $20.8 billion of capital, Washington Mutual had $45.6 billion of writedowns vs $12.1 billion of capital, and so forth.

Only full disclosure of toxic debts will get the West moving again

It has been a year of financial explosions

By Liam Halligan Last Updated: 5:44AM GMT 29 Dec 2008

The commercial pillars holding up the Western world - banking prudence and sound credit - have been smashed to smithereens.

The "advanced" nations are now flirting with economic collapse. The emerging economies have also suffered "collateral damage" – the West's "sub-prime" debt bombs now threatening the stability of global commerce.

The developed world is on course to contract by 1.1pc during 2009. That will hurt. The emerging markets are also set to slow – their growth falling to 3.1pc – as China and India feel the impact of lower Western demand.

But 2010 could be even worse – unless policymakers can piece the global economy back together. And the prevailing policy response –soft bail-outs, ultra-low interest rates and unfettered government spending – not only won't work, but will compound this crisis.

So how should Western governments respond? How can we escape this credit crunch, and prevent it being repeated?

As the Bank of England Governor Mervyn King said last month, "getting the banks lending normally again . . . is more important than anything else". After piling into risky assets for years, the Western banks now refuse to lend to millions of credit-worthy firms and households. That's jammed the wheels of finance, making fears of recession self-fulfilling.

The money markets are locked because the banks don't trust each other. Even they don't know how much toxic debt is out there – and which bank could be the next to fall. That's why the spread between the London Inter-bank Offered Rate and overnight interest rate swaps of the same maturity remains so wide – and wider in the UK, now, than either the States or the eurozone.

The crucial inter-bank market will remain frozen until the banks are forced, under threat of prosecution, to reveal the true extent of their sub-prime liabilities. Such "full disclosure" won't be easy – involving the exploration of millions of complex derivative contracts, often across borders – but it simply must be done.

America's first serious reaction to "sub-prime" was the Troubled Assets Relief Programme – buying up hundreds of billions of dollars of dodgy loans the banks didn't want any more. When that didn't work, the US asked banks to forfeit some share capital in return for government cash, as in the UK.

But that's failing too – as shown by sky-high Libor rates. So, as a matter of urgency, the West must copy the hard-headed Swedes – who, in the early 1990s, insisted nationalised banks write down the full extent of their non-performing loans before more public money is spent on recapitalisation. Only then – once the sub-prime losses are fully-exposed – can securities markets clear and the inter-bank market reboot.

http://www.telegraph.co.uk/finance/comment/liamhalligan/3982447/Only-full-disclosure-of-toxic-debts-will-get-the-West-moving-again.html

"The tremendous merit of gold is, if we want to put it that way, a negative one: It is not a managed paper money that can ruin everyone who is legally forced to accept it or who puts his confidence in it. The technical criticism of the gold standard become utterly trivial when compared with this single merit.”

Henry Hazlitt

2008-12-06T20:42:00.000-05:00

Dr. Jamil El Jaroudi, Chief Executive Officer, Elaf Bank, a Bahrain-based Islamic investment bank with an authorized capital of $500m, examined the challenges of innovation in the Islamic banking industry during the opening day of the 15th World Islamic Banking Conference held in the Kingdom of Bahrain.

Dr. Jaroudi was speaking at a session entitled, 'Creating the Next Generation of Islamic Finance Solutions: The Product Innovation Imperative'.

During his presentation Dr. Jaroudi pointed out that although innovation has become a 'buzz word' within the industry, the need for innovation in Islamic banking is real and is paramount to its continued survival.

Dr. Jaroudi examined innovation over four spheres: products, people, the market and regulation. He said, 'Innovation is crucial to revitalizing Islamic roots, improving customer satisfaction and creating new and sustained sources of income.

Dr. Jaroudi, a prominent industry expert continued:

'Growth in liquidity instruments will pave the way for long term investments, in particular, 'asset backed liquidity management instruments' are a progressive domain for innovation.'

He called for more products of handling and transferring risks particularly cross border risk and particularly currency risks, more work done to confirm, adapt or evolve products such as the (IPRS), Islamic Profit Rate Swap or (ICCS) Islamic Cross Currency Swaps and encouraged the analysis of (DEP) Diminishing Equity Participation as a bridging tool to encourage more people to look at Musharaka as an ultimate and most deep rooted instrument in Islamic Finance.

Addressing the importance of human capital, Dr. Jaroudi stressed that the dilemma was not how to attract skilled professionals but how to successfully retain them.

He went on to talk about the 'the market place' as an area where innovation in Islamic banking is needed, 'shareholders and owners of Islamic banks should believe in this industry and its orientation towards medium to long term activities. This means forgoing immediate, short term profits for a sustainable medium to longer term higher profits.'

Dr. Jaroudi said he would like to see more firms like Elaf Bank entering the market with the intention of developing the Islamic secondary market and with the aim to be market makers.

Elaf Bank's Chief Executive was optimistic about the future of Islamic banking and concluded, 'The developments noticed by the industry in recent years and the ongoing turmoil in the markets, leads me to believe that Islamic finance will soon provide very substantial and promising opportunities for specialization and diversification.'

2008-12-06T20:24:00.001-05:00

Abu Dhabi Islamic Bank opens Ras Al Khaimah branch

4 December 2008

04:15

Datamonitor News and Comment

English

Abu Dhabi Islamic Bank has opened a new branch in Ras Al Khaimah, which is the 45th location of the bank in the United Arab Emirates.

The new branch will provide Shari'a-compliant products and Islamic finance solutions in the region.

Ali AlShaqoosh, head of branches at Abu Dhabi Islamic Bank (ADIB), said: "We are planning to open new branches and install new ATMs in Dubai and Northern Emirates to rapidly expand our branch network within the coming year. The new branch, along with the existing one in Ras Al Khaimah, will service the residents of the emirate and neighboring suburbs too."

2008-12-06T19:56:00.002-05:00

QNB al Islami and QIIB enter finance agreement

5 December 2008

Global Banking News

English

QNB Al Islami, the Islamic branch of Qatar National Bank (QNB), Qatar International Islamic Bank (QIIB) and Qatar Real Estate Investment Company (AlAqaria) have entered into a financing agreement.

According to the Shari’ah-compliant finance agreement, the two banks would provide AlAqaria with an Ijara finance package worth QAR1bn. The fund would be used in the future development of AlAqaria projects in Qatar which are currently estimated at QAR2.5bn.

The financing is to come into effect from 1 January 2009.

[Editorial queries for this story should be sent to gbn@enpublishing.co.uk]

Retail Banking

Liquidity shortage triggers price war

5 December 2008

Middle East Economic Digest

English

With global financial institutions no longer lending to each other, and loan growth outstripping deposit growth in the region, competition for customers is becoming intense among Gulf banks

Melissa Hancock

The banking story of the second half of 2008 has been the end of interbank lending. The drying up of liquidity has prompted several Gulf banks to switch their focus from investment and wholesale banking to retail...

Al Salam Investment signs partnership agreement with German HSH Nordbank.

5 December 2008

Middle East and North Africa This Week

English

"Dubai-based investment company Al Salam Investment (ASI) signed an agreement with German shipping and renewable energy financer HSH Nordbank, ASI said in a press release. The two partners are expected to formally set up a joint venture in 2009 to strengthen funding and investment operations throughout the MENA region. They believe that Islamic finance, regional sovereign wealth funds, and economies driven by strong energy sectors are being predicted to hold the key to the recovery of the global economy. The union of regional operator ASI with the conservative traditions of conventional global financier HSH Nordbank will create a strong player operating on Islamic principles initially in the GCC and in the medium term throughout MENA region..."

Malaysian Islamic reinsurer ACR eyes foreign markets

5 December 2008

Reuters News

English

KUALA LUMPUR, Dec 5 (Reuters) - Malaysian Islamic reinsurer ACR ReTakaful SEA wants to grow in Indonesia, Brunei and Bangladesh, seeing long-term prospects for the business despite a global economic downturn, the firm said on Friday.

Rising demand for sharia banking products would drive the takaful, or Islamic insurance, market, ACR ReTakaful SEA Chief Executive Zainal Abidin M Noor said.

"We are in a difficult period at the moment in the sense that (there are) a lot of uncertainties," Zainal told reporters at the company's launch.

"But we are still optimistic. We still see that the growth of takaful is still much better than the conventional insurance at least in respect of the non-life side."

The company, which is a subsidiary of Dubai-based ACR ReTakaful Holdings Ltd, is also keen to tap opportunities in the Thailand and Philippines, he said.

ACR ReTakaful SEA will serve these countries from its base in Kuala Lumpur, he said.

Under Islamic insurance, members contribute to a pool of funds which is used to indemnify participants who suffer a loss.

Global premiums in Islamic insurance total about $2 billion to $3 billion and are expected to reach more than $7 billion by 2015, according to industry figures.

The industry is relatively small and many takaful firms currently cede part of their risks to conventional reinsurance firms because there is a lack of Islamic reinsurance capacity.

The Islamic reinsurance market is worth $1 billion, according to industry estimates.

ACR ReTakaful SEA has written about $5 million of gross premium income, the company said.

ACR ReTakaful Holdings is a joint venture between Singapore-based ACR Capital Holdings Pte Ltd, Malaysian state investment arm Khazanah Nasional Bhd. and the Dubai Banking Group.

Lawyers not worried about slowdown in Mideast, China; KING & SPALDING'S MIDDLE EAST managing partner says Gulf region is doing well through global economic crisis

BY VESNA JAKSIC

5 December 2008

Fulton County Daily Report (Atlanta)

Volume 119; Issue 237

English

LAW FIRMS WITH OFFICES in the Persian Gulf and China are starting to feel the impact of the global economic crisis, but lawyers pointed out that these regions are still faring better than other parts of the world.

"I think the Middle East is not immune to what's going on in the rest of the world," said Philip R. Weems, the Dubai, United Arab Emirates-based managing partner of Middle East offices for Atlanta's King & Spalding. "However, I think the Gulf is doing quite well through it."

International investors may reduce their investments in the Middle East as they assess their worldwide portfolios, Weems said. But even so, many practices in the Gulf have continued to prosper, including Islamic finance, he said.

Islamic finance is a system that follows the principles of Islamic law, or Shariah. These include socially responsible investments, while prohibiting interest-based banking and investments in sectors such as gambling and pornography.

King & Spalding is one of two Atlanta-based firms with a Dubai office, which it launched almost two years ago and followed with offices in Riyadh, Saudi Arabia, and Abu Dhabi, United Arab Emirates. The offices—with a total of 23 lawyers—have a busy Islamic finance practice and also offer construction and projects services.

Kilpatrick Stockton last month opened a small Dubai office to expand its construction practice into the Middle East. The two-lawyer office started with several U.S. clients that also are newcomers to the region, with the goal of also representing local participants in the frenzied Gulf construction boom.

Even as closings and layoffs hit a number of U.S. offices, expansion in the Gulf has continued. And while China is starting to see signs of a downturn for the first time in years, lawyers say this region also is far from experiencing the crisis seen in the U.S. and Europe.

In the Gulf region, many firms established their presence in Dubai in recent years, but nearby Abu Dhabi—capital of the United Arab Emirates—seems to be the latest hot spot.

In October, Akin Gump Strauss Hauer & Feld announced the opening of an office in Abu Dhabi and said it plans to have at least 20 lawyers there within four years. Holland & Knight opened an office in Abu Dhabi in September, and Clifford Chance did so in August. Baker & McKenzie announced in October it would open in Abu Dhabi sometime this year. New York's Dewey & LeBoeuf, which has said it will close four U.S. offices by early next year, plans to open doors next year in Abu Dhabi, as well as another capital in the Gulf region—Doha, Qatar.

"Over the last year, firms are really coming to Abu Dhabi," said Donald P. Moore, executive partner of Holland & Knight's Abu Dhabi office. "Some of them are shifting their resources here. I think everyone is certainly seeing Abu Dhabi as the next big thing. Everyone wants to be here."

While there still is plenty of work for lawyers in Dubai, several lawyers there said some of it has slowed down in recent weeks. This is reflected in areas such as real estate, where lawyers said prices have dropped in recent months. Abu Dhabi is not as developed as Dubai so there is still plenty of work ahead, lawyers said, pointing out that the city has most of the United Arab Emirates' oil reserves and plenty of financial resources.

Both Abu Dhabi and Dubai—and the Middle East region in general—are doing well during the global economic crisis despite some slowdown in recent weeks, lawyers said.

"We remain as a firm very committed to the region, and I would say very bullish on the region," said Steven H. Davis, chairman of Dewey & LeBoeuf. "There has been a huge accumulation of capital in the Middle East and that will drive a lot of commercial activity, even in the face of weakness in global financial markets."

Even if there is no new capital flowing in, the existing amount is large enough to provide a cushion against problems affecting other parts of the world, Davis said. Lawyers said most countries in the Gulf region—such as the United Arab Emirates, Saudi Arabia and Qatar—have large cash reserves in sovereign wealth funds. The governments tend to finance almost everything out of their operating budgets so they are not as leveraged as other nations, lawyers said. Work for the government and government entities is just as strong, they said.

Roger Parker, Reed Smith's London-based managing partner for Europe and the Middle East, said the global financial crisis will likely have a bigger impact in the Gulf in 2009 than it did this year. But even if firms face a negative period in the near future, Smith said the region will continue to be a hot spot for lawyers.

"If anything, the position will be reinforced because they are not so dependent on the leveraged finance techniques that have been deployed by the Western banks," he said. "I would think that these strongly emerging markets will continue to develop at a faster pace than their Western counterparts and therefore continue to be of key interest."

Many countries in the Gulf are emerging economies, so any slowdown likely will not change the fact that they are still growing faster than most countries, lawyers said.

China is another example of this, attorneys said. The country's 2007 gross domestic product growth rate is estimated at nearly 12 percent, according to the CIA's World Factbook.

"That kind of economic growth, combined with strong commercial activity, creates the need for lawyers," said Dewey & LeBoeuf's Davis.

Even if that figure is cut in half, Davis pointed out that's still more growth than most economies will see. For example, the 2007 gross domestic product growth in the United States was only 2 percent, according to the Factbook.

Thomas W. Albrecht, a Chicago-based partner at Sidley Austin who is a member of the firm's management committee responsible for Asia, said China has seen a slowdown in recent weeks in practices that focus on financial institutions, investment banks and capital markets.

"That's the bad news," said Albrecht, co-head of the firm's global securitization and structured finance group. "The good news is that the region still has underlying strengths. Fundamentals are still very strong and it's my sense that part of the world will emerge from this probably stronger than the rest of the world, simply because of the underlying fundamentals."

While inbound investment may decline, Albrecht said he still expects to see a lot of outbound investment. Many companies in China have global ambitions and are now thinking about acquisitions they can make in the U.S., Europe and other parts of the world, he said.

Sidley Austin continues to view the Asia-Pacific region as one of great strategic importance, Albrecht said.

"If anything, we look for opportunities to use the temporary weakness to expand our footprint, if we can find the right lateral candidates to do that," he said.

Vesna Jaksic writes for The National Law Journal, a Daily Report affiliate. She can be reached at vesna.jaksic@incisivemedia.com.

Islamic finance is a system based in shariah law...Napoleoni said these principals are actually quite similar to the principles of classical economics

2008-11-21T17:24:00.000-05:00

New Take on Islamic Finance:
"Islamic finance is a system based in shariah law...Napoleoni said these principals are actually quite similar to the principles of classical economics."

http://www.unm.edu/~market/cgi-bin/archives/003402.html
Complete Lecture:
http://www4.unm.edu/unmlive/?p=153
As the dust settles from the 2008 elections, pressing questions remain about the state of the world economy. “This is the major crisis that Western capitalism is facing since 1929,” said economist Loretta Napoleoni during a lecture sponsored by UNM’s International Studies Institute. Napoleoni’s talk on “The Global Financial Crisis” was the keynote of ISI’s lecture series, “Global Instability: Causes, Consequences and Cures.”

She also attributed some of the severity of the crisis to the war on terror. “The war on terror… turned out to be a total financial folly. And part of the problem of what we’re facing today – not that it created the credit crunch, absolutely not, but it weakened the defenses of the American economy to deal with a crisis like that.”

She said that financial regulations in the Patriot Act led international investors to get out of the dollar and invest in other currencies. “What’s happened after 9/11 is that the tough regulations imposed by the monetary authority, coupled with the suspicious attitude that the U.S. had toward Muslim investors, convinced many investors from oil countries to repatriate their funds.”

Napoleoni is the author of “Rogue Economics: Capitalism’s New Reality,” “Terror Incorporated” and “Insurgent Iraq.” She is an expert on financing of terrorism and advises several governments on counter-terrorism. She is senior partner of G Risk, a London-based risk agency.

To view the complete lecture, visit The Global Financial Crisis.

News Clips from the past week Nov 14

2008-11-21T17:21:00.001-05:00

THE NEW SILK ROAD; Historic bonds between the Middle East and Asia are being revitalized in a torrent of trade and investment in energy...
BusinessWeek, 17 November 2008, 3004 words, (English)
...goods to the Mideast annually 6. Chinese contractors are planning an aluminum smelter at Jazan Economic City, near the Saudi border with Yemen 7. Malaysia's MMC is a partner in Jazan; Kuala Lumpur is becoming a center for Islamic finance ...

Regulatory watch: UAE
Economist Intelligence Unit - Business Middle East, 16 November 2008, 552 words, (English)
...The most important changes have been in the Department of Economic Development (DED) and the Department of Finance , which handle Dubai’s budget and investment affair, as well as strategic economic planning and commercial registration. According to...

Middle East: Sharia haven?
Economist Intelligence Unit - Business Middle East, 16 November 2008, 836 words, (English)
...treasury at Kuwait Finance House, said the vast majority of industry representatives at a recent World Bank meeting on Islamic finance took the view that the current crisis is a vindication of sharia finance principles. Third-quarter results suggest the...

Kuwait Finance House - Bahrain announces outstanding Q3 results ; BD 30mln with 49% increase
ENP Newswire, 14 November 2008, 435 words, (English)
...Kuwait Finance House-Bahrain is a leading provider of Islamic commercial and investment banking services. Established in 2002 as a wholly owned subsidiary of Kuwait Finance House (Kuwait) -- an industry leader for more than 30 years-KFH-Bahrain specializes...

BCHB Announces 9M’08 Net Profit of RM1.633bn
ENP Newswire, 14 November 2008, 1432 words, (English)
...bonds. In Malaysia, CIMB Investment Bank remained no. 1 in M&A, primary bonds and stockbroking and no.3 in IPOs. CIMB Islamic continued to lead in domestic and global Islamic investment banking league tables. CIMB Bank’s share of preferred products...

Q&A Ahmed al-Khateeb, CEO and managing director
Middle East Economic Digest, 14 November 2008, 1956 words, (English)
...was approached by high net-worth individuals and families. I contacted people I knew with the same vision of setting up a world-class Islamic investment house. We met in late 2005 to establish a successful investment house in Saudi Arabia....

Jadwa Investment
Middle East Economic Digest, 14 November 2008, 1012 words, (English)
...its authority in the market from a standing start. Few Saudi banks offer project finance services and debt finance , particularly Islamic bonds (sukuk). HSBC was the only one to have a leading debt finance team that included sukuk. Jadwa was judicious...

State-backed funds struggle to gain support for loan deals
Middle East Economic Digest, 14 November 2008, 678 words, (English)
...relaunched after being restructured by the underwriters to include an Islamic tranche, the size of which will depend on the appetite in the market...syndication before the end of the year, the underwriters will have to finance the deal themselves....

WEEKLY: PARSOLI CORPORATION LTD JUMPS 21.2% ON WEAK VOLUME
Indian Company News Bites – Stock Report, 14 November 2008, 990 words, (English)
...US$27.1 billion). In 2008 earnings for the sector grew 24.0% compared with those of 2007. The main players in the sector include M M T C Ltd., Reliance Capital Ltd, Kotak Mahindra Bank Ltd and Infrastructure Development Finance Company Ltd....

Samba Financial Group - Capital Intelligence Rating Report.
Capital Intelligence, 14 November 2008, 1096 words, (English)
...offset by increases in special commission income (the Bank's special commission differential has held up well), corporate finance /advisory and card services. Deterioration in alternative investment valuations has adversely affected both profits and the...

News Clips from the past week

2008-11-06T22:49:00.001-05:00

60 PCT SUKUK ISSUANCE ORIGINATE FROM M'SIA, DEWAN RAKYAT TOLD
Bernama Daily Malaysian News, 6 November 2008, 145 words, (English)
...Malaysia is in the forefront of Islamic banking and finance as 60 percent of the sukuk issued globally originate from the country, the Dewan Rakyat was told today....

BNP PARIBAS FALLS 3.8% ON FIRM VOLUME, IN SIGNIFICANT DOWNTREND
Italian Company News Bites – Stock Report, 6 November 2008, 1115 words, (English)
...September 16: ISLAMIC DEALS ENHANCE BNP PARIBAS EXPANSION...

IFC TO PROVIDE $3 MILLION TO FACILITATE TRADE IN WEST BANK AND GAZA
States News Service, 6 November 2008, 414 words, (English)
...El-Bireh and has seven branches and one office operating in the West Bank and Gaza Strip. The Bank offers a wide range of Islamic finance products for retail and commercial banking. For more information, visit www.aibnk.com....

New Bahrain Islamic bank mulls private equity deals
AFX Asia, 06:51, 6 November 2008, 456 words, (English)
...investors who want to avoid earning or paying interest viewed as usury under Islamic law. (For Reuters content on Islamic finance , click on) (Reporting by Frederik Richter; Editing by Sharon Lindores) Keywords: FIRSTINVESTMENT BAHRAIN/PRIVATEEQUITY...

Turkish commentary urges West, US to "benefit" from Islam
BBC Monitoring European, 06:30, 6 November 2008, 887 words, (English)
...The latest economic crises have highlighted the advantages of Islamic business and finance , and ethical/interest-free banking. Islam maintains the entrepreneurial spirit and insists that capital be...

INTERVIEW- Islamic finance body sees growing consensus on law
Reuters News, 04:34, 6 November 2008, 543 words, (English)
...* Islamic finance industry body IFSB sees more common ground in interpretation of Islamic law...

Reuters Summit- Islamic finance not immune to global woes
Reuters News, 04:04, 6 November 2008, 584 words, (English)
...commodities, be it equities, stock markets, stocks, be it real estate, their prices were affected and this is where Islamic finance is affected," Henry Azzam, chief executive for Middle East and North Africa at Deutsche Bank, told the Reuters Middle...

Taiwan Regulator Ties up With Financial Authority in Dubai
Best's Insurance News, 6 November 2008, 150 words, (English)
...The Dubai-based DFSA is an independent regulator for financial services including asset management, banking, Islamic finance and insurance....

ABC financial crisis losses top $974m
Mist News, 00:52, 6 November 2008, 676 words, (English)
...ABCs strengths in trade, project, corporate and Islamic finance have ably serviced the current business expansion in the region, whilst the development of retail, small and medium enterprises and commercial banking activities in the niche markets...

Kuwaits KFH optimistic about Q4, eyes Gulf, Asia
Mist News, 00:45, 6 November 2008, 562 words, (English)
...Major Gulf Islamic lender Kuwait Finance House (KFH) is “optimistic” about fourth-quarter profit and is going ahead with an expansion in the Gulf and in Asia, its chief executive said on Tuesday. Mohammad al-Omar told the Reuters Middle East Investment...

CBB meets AlBaraka Banking Group senior delegation
Middle East Company News, 6 November 2008, 204 words, (English)
...Mr. Al Maraj briefed the delegation about the latest economic and financial sector developments in Bahrain and pointed to the increased interest in Islamic Finance due to the current global financial situation....

London to host GCC-EU forum
Gulf Daily News, 6 November 2008, 316 words, (English)
...The sectors of insurance, trade, finance , Islamic banking, food industries, agriculture, new industries, IT and real estate will be in the limelight....

Kuwait's KFH unit wins Saudi investment licence
Reuters News, 21:36, 5 November 2008, 82 words, (English)
... KUWAIT, Nov 6 (Reuters) - Islamic lender Kuwait Finance House said on Thursday its fully-owned Saudi unit has won an investment licence to operate in Saudi Arabia....

Project funds drying up in Dubai
The Australian, 6 November 2008, 1013 words, (English)
...The Dubai royal family-backed developer is facing the maturity of $US3.52 billion ($5.1 billion) of Islamic bonds in December next year. It has about $US30 billion worth of projects in progress....

Unicorn Investment Bank achieves strong results
Middle East Company News, 5 November 2008, 738 words, (English)
...Unicorn Investment Bank B.S.C. (c) (Unicorn) is an Islamic investment bank, with an international presence in the United...Unicorn is built around six core business lines: Corporate Finance , Capital Markets, Private Equity, Asset Management, Strategic...

High-powered UK delegation heads to Bahrain
COI News Distribution Service, 5 November 2008, 487 words, (English)
...Some of the UK's top financial services companies will descend on Bahrain from 23 to 25 November to showcase the UK's expertise in Islamic finance at the 15th World Islamic Banking Conference....

Malaysia's RHB Islamic in unit trust, insurance deal
Reuters News, 00:05, 5 November 2008, 174 words, (English)
...not only generated from the Muslim customers, but also from our non-Muslim investors." (For more Reuters coverage of Islamic finance , click on [ID:nISLAMIC]) (Reporting by Liau Y-Sing; Editing by Ben Tan)...

Family Shariah Fd Quarterly results
Regulatory News Service, 23:00, 4 November 2008, 1765 words, (English)
...Blomfield

News Clips from the past week

2008-10-30T23:58:00.001-04:00

RHB Islamic confident of 20% loans growth in FY08

Amwal, Shuaa Capital and QInvest successfully close a QR728m Shari'ah compliant Mezzanine investment vehicle

Emirates Islamic Bank Announces Outstanding Q3 Results

Islamic bank set up in Bahrain

Two UAE-based financial institutions joined hands with other GCC firms to launch an Islamic bank in Bahrain, yesterday with an authorised capital of $200 million (Dh734m) and a paid-up capital of $120m, said a statement.

Amrahbank is ready to launch services Islamic banking

Islamic banking may flourish in Afghanistan: most Afghan traders against getting loan on interest

Standard Chartered to launch Islamic banking in Bahrain

Mashreq reports impressive nine months results

CIMB PRIVATE EQUITY AND ALAM MARITIM IN RM252 MLN JV
BARWA Real Estate Announces QR299 Million Q3 2008 Profit
EIB Q3 PROFIT NEARLY DOUBLES
SAUDI ARABIA, QATAR SAY BANKS ARE SOLID:

Meezan Bank establishes 125 branches across Pakistan successfully established over 125 branches spread over 35 major cities across Pakistan within a short span of six years.
growth in branch network is the fastest in the Banking history of Pakistan. The investment in the branch network is driven by the Bank's vision to establish Islamic Banking as the Banking of First Choice so as to enable it to reach each and every citizen of Pakistan

Abu Dhabi, United Arab Emirates, banking briefs
Oct. 30--EIB Q3 PROFIT NEARLY DOUBLES: Emirates Islamic Bank has reported that its third-quarter profit almost doubled, Bloomberg reported. Net income advanced to Dhs123.9m ($33.7m), or 0.13 dirham a share, from Dhs68.6m, or 0.07 dirham, in the year-earlier period. Income from financing jumped 87 percent to Dhs225.7m.

SAUDI ARABIA, QATAR SAY BANKS ARE SOLID: The central bank governors of Saudi Arabia and Qatar said their banks are well-capitalized and can withstand any downturn in global markets, Bloomberg reported. Saudi Arabia's local banks are 'highly liquid' and have 'good capital adequacy,' Hamad Saud al-Sayari said. Meanwhile, Qatar's central bank governor Abdulla Bin Saud al-Thani said the country has 'very solid banks, highly capitalized, highly liquid and nothing needs to be done by the central bank'.

Approaching zero With rates down to 1%, the Fed may next try more unconventional steps

2008-10-29T17:59:00.001-04:00

International Islamic Financial Market launches first-ever standardised Master Murabaha, Agency Agreements

2008-10-11T11:53:00.001-04:00

10 October 2008

Pakistan Press International Information Services
Manama, October 09 (PPI) : International Islamic Financial Market (IIFM) launched worlds first-ever standardised Master Agreement in Islamic finance. IIFM Master Agreement for Treasury Placement (MATP) can be used by financial institutions across the globe for their over-the-counter Commodity Murabaha transactions.

With estimated value of more than $100bn, Commodity Murabaha currently is widely used Islamic money market product in GCC and other jurisdictions for liquidity management purpose. The development of MATP culminates a year of work by IIFM Secretariat involving Islamic financial institutions, Shariah scholars, legal experts and other market practitioners, said Khalid Hamad, Chairman IIFM & Executive Director Central Bank of Bahrain.

Standardisation of certain broader market documentation, products has become critical need for growing Islamic finance industry in many regions of world, said Ijlal Alvi Chief Executive Officer of Bahrain-based IIFM.

He says going forward such support by CBB and other permanent member jurisdictions DIFC, Labuan Offshore Financial Services Authority Malaysia, Bank Indonesia, Bank of Sudan, State Bank of Pakistan, Vrunei Finance Ministry & Islamic Development Bank will continue to ensure wider adaptation.

Shariah-compliant investment company Amara launches today with first investment into China

2008-10-11T11:50:00.001-04:00

Newhaven Investments House announces today the launch of Amara Holdings Inc ('Amara' or 'the Company'), a Shariah-compliant investment company which focuses on pre-IPO, private equity and private placement opportunities predominantly in China, as well as MENA and India.

Islamic finance rides the storm CLANCY YEATES 1065 words 11 October 2008 The Sydney Morning Herald

2008-10-11T11:43:00.001-04:00

Islamic finance rides the storm

CLANCY YEATES

11 October 2008

The Sydney Morning Herald

Comment & Analysis

A thriving financial sector sounds like an oxymoron these days. Even Australia's banks - among the most profitable in the world - kept a fifth of this week's interest rate cut to cushion their margins. But there is one sector that has tongues wagging in the hubs of commerce: Islamic finance.

Sukuk Squeeze? Economist Intelligence Unit - Business Middle East

2008-10-11T11:34:00.002-04:00

This story was covered in The Economist Intelligence Unit - Business Middle East
16 October 2008
The sukuk market has shrunk this year: a knock-on effect of the global credit crisis, or the result of tougher rules on sharia-compliance?

The volume of Islamic bond issuance, which recorded massive growth rates in 2006 and 2007, has dropped during the year to date. There is a lively debate as to whether this can be attributed mainly to global financial market conditions or whether a new-found fastidiousness in sharia-compliant structuring in causing the downturn.

Islamic finance and banking will win

2008-10-11T11:15:00.000-04:00

Friday, 26 September 2008 BDO Stoy Hayward says financial turmoil puts Islamic products in strong position. Written by Paul Williams

With the financial markets in the most volatile state since the 1930s, and the London Stock Exchange experiencing more highs and lows than a rollercoaster ride, increasing numbers of individuals and corporations will now invest in Islamic banking and Sharia compliant products than ever before, predicts accountants and financial advisers BDO Stoy Hayward...

http://www.dofonline.co.uk/strategic-finance/islamic-finance-and-banking-will-win5525874.html

Interesting Insights on Islamic Banking from a non-Muslim

2008-10-11T11:12:00.000-04:00

http://makewealthhistory.org/2008/10/10/learning-from-islamic-finance/

Although I’d happily consider a mortgage from an Islamic bank if I needed one, my point here is not necessarily to advocate Islamic banking as the answer. The title says it all - what can we learn from this? Are their some principles we could take away about exploitative interest? How can we provide mortgages that are fair in the long term? Can we distribute profit and loss more equitably, rather than the bank always winning?

As a Christian, I’m challenged by this too, because the Bible also forbids usury. ‘If you lend money to one of my people among you who is needy, do not be like a moneylender; charge him no interest’, says Exodus 22, although other passages (see Luke 19) suggest it is excessive interest that is condemned, rather than the interest per se. Either way, where are the Christian millionaires calling for more ethical banking? Where are the theologians sitting down with economists to make sure our banking doesn’t violate the principles of the Kingdom of God?

What is at the core of the philosophy of Islamic Finance is the idea of money a measure of value, and not a real asset in itself. According to the principles of Islamic Finance, profiting from money–including charging interest on loans–is regarded as riba, or non-permissible investing activity under Sharia law. Instead, what Islamic Finance emphasizes is the idea that the investors should share the risks involved in whatever projects they are investing in, and that they should be investing in real things, whether it’s land improvement projects, housing, or helping start up a new business.

http://www.adbusters.org/blogs/adbusters_blog/islamic_finance_and_possibility_rebirth.html#comment-5500

Could the credit crunch prove to be a boon for Islamic banking - and for Asian entrepreneurs? - Management Today Magazine

2008-10-11T11:07:00.000-04:00

It’s been another rotten week for our big banks, whose struggles continue despite the best efforts of governments. But according to accountants BDO Stoy Hayward, their woes could provide an opportunity for Islamic banks. Since they’ve generally been much more conservative (for which read: much less leveraged) than their conventional Western counterparts, they’ve been less affected by the problems in the credit markets – which could make them a much better bet both for investors seeking stable returns, and for entrepreneurs on the hunt for financing…

http://www.managementtoday.co.uk/channel/GovernanceCSR/news/852697/asian-jewels-crown/

Did Sukuks guaranteed a buyer that principal would be paid back, even in the case of default?

2008-09-30T08:04:00.000-04:00

Fatally Flawed Bonds

Portfolio.com © 2008 Condé Nast Inc.
http://www.portfolio.com/news-markets/top-5/2008/09/23/Changes-in-Islamic-Finance

by Kit R. Roane Sep 23 2008

Western markets aren't the only ones shaken by change. A popular instrument in the red-hot Islamic finance sector has been declared in conflict with the Koran.

Sheik Muhammad Taqi Usmani at an Islamic finance and trade conference in London in 2006.

Photograph by: Graham Barclay/Bloomberg News/Landov

Investors in Western securities have been given plenty to fret about recently as markets have seized up, money flows have frozen, and confidence has evaporated. But at least they haven't had to tangle with God as well.

Not so in the land of Islam, where the world's fastest-growing debt market has hit the skids in part because leading Islamic scholars began to question whether some popular Islamic bonds, or sukuks, followed religious law.

The fact that such questions exist point to a peculiar risk in Islamic markets that—because leverage is generally eschewed and securities are closely tied to assets—have been viewed as more resilient than their Western counterparts.

The questions also come at a time when that resilience is showing its limits; the Middle East is now grappling with the contagious global credit crunch and worries over its own overheated asset market. And the debate among Islamic scholars is sure to complicate those woes.

"The irony is that current market conditions are the result of deficiencies with [the] backbone of the conventional finance industry," says Rahail Ali, head of Islamic Finance at the Dubai office of Lovells, an English law firm.

Ali added that the debate among Shariah scholars has gained prominence because the sukuk market is now "open to a much wider investor base, some of which isn't familiar with the fact that differences of opinion among the Shariah scholars are very much to be expected."

Those investors got their first taste of "religious interpretation risk" last November when Sheik Muhammad Taqi Usmani said he believed that as much as 85 percent of Islamic bonds already in the market had a critical religious flaw baked into them: They guaranteed a buyer that principal would be paid back, even in the case of default.

Conventional bonds routinely carry such provisions but they are problematic for Muslims who are, among other things, barred from accepting interest, or engaging in any business where profit and risk are not equally shared.

To work around some of the simplest issues, Islamic bonds are supposed to derive their payment stream from the revenue thrown off by a real asset or some similar structure, while any repurchase is seen as just a return on a lease, and should be done at market rates.

But in an attempt to securitize a wider array of assets, or to make more appealing structures, many Islamic bonds have veered too close to a Western interpretation of what a bond should be. Or, as Usmani wrote, Islamic financial institutions, in an attempt to compete in "the conventional, interest-based marketplace," have churned out products that give lip-service to Islam while using "ploys that sound minds reject and bring laughter to enemies."

Such statements by Usmani, who is the powerful chairman of the board of Islamic scholars at the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions, sent a chill through the sukuk market.

A clarification in February by the entire A.A.O.I.F.I. board outlining more clearly how sukuks could stay in compliance didn't provide much reassurance.

The effect on financing has been measurable. So far this year, only about $14 billion in Islamic bonds have been issued, compared with around $23 billion during the same time frame last year, according to Standard & Poor's. That is a decline of almost 40 percent.

Noting the "confusion" over what scholars will deem to be acceptable Islamic debt structures, Jaime Sanz of Fitch's emerging markets structured-finance team wrote in a recent research note that "a liquid, transparent, and efficient" Islamic debt market "is of paramount importance" as countries including Saudi Arabia and the United Arab Emirates face the need for "substantial" infrastructure investments.

While much of the Middle East's development still relies on conventional finance, the $70 billion Islamic bond market has grown rapidly thanks to the huge influx of petrodollars and the greater interest in Shariah-compliant investing among Muslims.

"Just as there are more women wearing veils, there are more people interested in Islamic products," says Professor Ibrahim Warde, of the Fletcher School of Law and Diplomacy at Tufts University. The sukuk market, he adds, is just part of a $900 billion Islamic financial sector that grew about 37 percent in 2007.

Those assets have attracted Western bankers looking for a foothold in the Middle East, and Western institutions looking for diversification with attractive yields. Just "10 or 15 years ago, many Western institutions would not have been interested in Islamic finance because it looked too complicated," Warde says. But now, Western banks like J.P. Morgan, Citigroup, and Morgan Stanley are among the leading underwriters in the Islamic bond market.

That market has become the spine of the Islamic insurance industry, a catalyst for the development of the region's capital markets, and has funded the development of everything from Bahrain's financial center and Dubai's Palm development to Emirates Airlines' expansion and a Kuwaiti-led consortium's leveraged buyout of British sports-car maker Aston Martin.

Sukuks have also begun to be floated in Western markets and are backing Western assets. The German state of Saxony-Anhalt and the World Bank have both issued sukuks, while a small Texas oil and gas exploration firm called East Cameron Partners issued an Islamic bond backed by some of its offshore Louisiana gas reserves.

Standard & Poor's estimates that the sukuk market will exceed $100 billion by 2009, even with the latest hiccup. But the Islamic bonds that will be floated are unlikely to push the envelope in the ways others did before, and the innovation that helped sukuks gain acceptance in an ever-growing universe of deals could slow.

Dr. Mohamed Damak, a ratings specialist at Standard & Poor's, notes that he has "clearly noticed a shift in the structures of sukuks issued in 2008 toward Ijara (where financing is accomplished through a form of sale-lease back of real assets) away from Musharakah (a more controversial form of profit-sharing questioned by Islamic scholars).

Even without the religious controversy, questions remain as to whether sukuks might ever grow beyond being a niche product, since Islamic law prohibits them from being tranched (sliced up into different yields) or effectively hedged.

Professor Samuel Hayes of Harvard Business School notes that the prohibition on hedging means that any financial arrangement that could be affected by changes in exchange rates or in the rate of inflation leaves the investor "vulnerable to a very substantial risk."

They also have yet to be tested in a default. Warde says this is among the chief concerns for the market going forward. Although sukuk issuers have tried to devise asset liquidation mechanisms that dovetail with those found in conventional bonds, none of these have been tested in court.

"The main fear that investors have is what will happen in practice if some sukuk goes bad," he says. While most Islamic contracts now prescribe English law to be governing, Warde says that "in the case of failure of sukuk, the process of adjudication will be a complex and long-drawn affair, whereby judges will want to know what sukuk really are, and as part of that process, Shariah scholars will no doubt have some input."

With easy credit and oil powering the Gulf real estate markets to dizzying heights, such defaults might come sooner than anyone thinks, making the Shariah scholars among the hottest commodities around.

“People are looking for Islamic banks, which are outperforming conventional ones.”

2008-09-29T00:29:00.001-04:00

“People are looking for Islamic banks, which are outperforming conventional ones.”

Alinma Bank, which in April raised $2.8 billion in Saudi Arabia’s biggest initial share sale for five years, jumped as much as 80 percent as it began trading in Riyadh Tuesday.

The state-backed Islamic bank, which sold shares at 10 riyals ($2.67) each and has yet to open for business, was trading at 14.75 riyals at 10:53 a.m. after climbing to as much as 18 riyals, Bloomberg reported.

Alinma, founded by three Saudi government funds in 2006 to become an Islamic retail and corporate bank, on April 20 said it got offers worth 18.27 billion riyals for 1.05 billion shares it offered the Saudi public. With help from Samba Financial Group it sold shares to raise 10.5 billion riyals.

“The shares should do well as the I.P.O. did,'’ Faisal Hasan, of Global Investment House KSCC, told Bloomberg before the shares started trading. “People are looking for Islamic banks, which are outperforming conventional ones.”

Go to Article from Bloomberg News »

http://www.bloomberg.com/apps/news?pid=20601085&sid=azH8ENkEpm9U&dlbk

US lawmakers publish rescue deal (BBC)

2008-09-28T18:26:00.000-04:00

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7640872.stm

US lawmakers publish rescue deal
http://news.bbc.co.uk/2/hi/business/7640872.stm

Please turn on JavaScript. Media requires JavaScript to play.

McCain and Obama back bail-out package

US politicians have published a $700bn deal to bail out Wall Street and end the global credit crunch.

The measure allows the Treasury to spend up to $700bn (£380bn) buying bad debts from ailing banks in the USA.

In return the government will get a stake in these firms, the pay of bank bosses will be limited and the bail-out will be independenly monitored.

It is the biggest intervention in the markets since the Great Depression of the 1930s.

Nancy Pelosi, the Democrat leader of the House of Representatives said the message to Wall Street was that "the party is over".

She said the "bipartisan deal" was "not a bailout of Wall Street", but designed to ensure pensions, savings and jobs would be safe.

The Democrat majority leader of the Senate, Harry Reid, said Americans had "every reason to be concerned and even angry" in the light of the "greed on Wall Street" and "unenforced regulations".

During the past two weeks, the global credit crunch has seen several financial institutions running into liquidity problems, where they cannot free up the money to keep their daily business going.

In the United States' largest bank failure, Washington Mutual was taken over by regulators and sold on to JPMorgan Chase
Several investment banks got into varying degrees of trouble, with Lehman Brothers collapsing, Merrill Lynch seeking refuge in a takeover by Bank of America and Morgan Stanley securing a large capital injection from a Japanese rival
US insurance giant AIG had to be bailed out by the US government, which effectively took an 80% stake in the firm
In the UK, meanwhile, mortgage lender Bradford & Bingley is set to be nationalised on Monday morning, with parts of the business sold on to other banks
In Germany Hypo Real Estate, a bank specialising in financing property deals, is widely reported to face a serious cash crisis
The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, effectively nationalising it

No golden parachutes

A vote on the package is expected in the House of Representatives on Monday, with the Senate potentially voting on Wednesday.

When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration
Senator Barack Obama

The US administration wanted a deal to be announced before markets open in Asia on Monday morning.

The deal addresses several of the key concerns raised by both Democrat and Republican critics of the original plan proposed by the US administration.

The government will get the money in tranches - $250bn straight away, and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn
Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks' recovery
Top bankers, meanwhile, will see their pay limited, and "golden parachutes" - huge payments when they leave the firm - will be banned
The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves
An independent Inspector General and a bipartisan oversight board will monitor the deal
Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities

The proposed legislation was now "frozen", said Ms Pelosi, which means critics can not strike out individuals provisions that they do not like.

The text of the deal has now been put on the internet, but immediately after the deal was announced all websites showing the published text crashed because of the huge public interest in its provisions.

However, these provisions may not be enough to placate all the critics of the bail-out, both on the Republican and Democrat side of the political divide.

Already, several key critics of the deal called on their fellow legislators to block it.

IFIC: Islamic funds begin to take hold (CANADA)

2008-09-28T18:19:00.000-04:00

IFIC: Islamic funds begin to take hold http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=46160&IdSection=147&cat=147&BImageCI=1 The market is surging worldwide and assets are expected to double to US$1.4 trillion in less than two years Friday, September 26, 2008 By Olivia Glauberzon The Shariah-based investment industry is flourishing and expected to double in assets in less than two years, said experts in Islamic finance during a presentation at the Investment Funds Institute of Canada’s annual conference in Toronto on Thursday. Currently with assets of US $700 billion worldwide — and growing at a 22%-a-year pace — Shariah-compliant funds are expected to double to US$1.4 trillion in assets by 2010, said Rehan Saeed, a Shariah liaison with the Mississauga, Ont.-based Islamic Finance Advisory Board. Shariah, otherwise known as Islamic religious law, governs all Islamic banking and investing practices. To comply with Shariah, stocks and bonds within a portfolio need to be screened for the types of businesses they are associated with. For instance, investments related to alcohol, tobacco, gambling, banking and pornography are not allowed, said Imtiyaz Ahmed, representative for Shariah capital markets at frontierAlt. “Think of it as a socially responsible fund,” Ahmed added. “There are a just a few extra controls.” Besides business screens, Shariah-compliant funds also restrict investments in companies with excessive debt. Ahmed explained that “excessive” is a debt to equity ratio above the 30% range. However, Shariah regulators recognize it’s not a perfect world. Inevitably, regardless of how hard fund managers try to create products in line with the framework, some companies may have a small income stream coming from interest or from a black-listed activity. To solve this problem, funds can be “purged of their sins” by donating a company’s income stream from non-Shariah compliant activities to charity, said Habib Meghjee, associate partner at Deloitte & Touche LLP. For example, if a fund invests in a company that earns $10 a share, but has 10% of its revenue coming from interest income, the fund managers would donate $1 a share to charity in order to be 100% Shariah compliant, Meghjee said. A growing Muslim population demanding more Shariah-compliant funds in Canada has driven the demands for these investments in North America, said Ricky Pinto, also a partner with Deloitte & Touche. “There’s only a sprinkling of funds in Canada,” said Pinto. “Around the world, people are seeing these opportunities.” Currently, the $3 million frontierAlt Oasis Canada Fund is the only Shariah-compliant fund in Canada. The fund’s assets under management have tripled from $1 million since launching in November 2006, according to Les Young, vice president of frontierAlt. And with the Muslim community expected to grow to 4.9% from 3.7% of the Canadian population by 2017, Saeed said, the Shariah-compliant based fund industry is still largely untapped. Islamic finance began in the 1960s, staring with two funds in Egypt and Malaysia. Today, the industry has grown to include a number of funds and governing bodies around the world. The organizations include the Accounting and Auditing Organization for Islamic Financial Institutions, the Islamic Financial Services Board and the International Islamic Rating Agency. http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=46160&IdSection=147&cat=147&BImageCI=1

Shariah Capital Markets

The End of the Financial World as We Know It

Only full disclosure of toxic debts will get the West moving again

It has been a year of financial explosions

Islamic finance is a system based in shariah law...Napoleoni said these principals are actually quite similar to the principles of classical economics

New Take on Islamic Finance:"Islamic finance is a system based in shariah law...Napoleoni said these principals are actually quite similar to the principles of classical economics."

News Clips from the past week Nov 14

News Clips from the past week

News Clips from the past week

Approaching zero With rates down to 1%, the Fed may next try more unconventional steps

International Islamic Financial Market launches first-ever standardised Master Murabaha, Agency Agreements

Shariah-compliant investment company Amara launches today with first investment into China

Islamic finance rides the storm CLANCY YEATES 1065 words 11 October 2008 The Sydney Morning Herald

Sukuk Squeeze? Economist Intelligence Unit - Business Middle East

Islamic finance and banking will win

Interesting Insights on Islamic Banking from a non-Muslim

Could the credit crunch prove to be a boon for Islamic banking - and for Asian entrepreneurs? - Management Today Magazine

Did Sukuks guaranteed a buyer that principal would be paid back, even in the case of default?

Fatally Flawed Bonds

“People are looking for Islamic banks, which are outperforming conventional ones.”

US lawmakers publish rescue deal (BBC)

IFIC: Islamic funds begin to take hold (CANADA)

New Take on Islamic Finance:
"Islamic finance is a system based in shariah law...Napoleoni said these principals are actually quite similar to the principles of classical economics."