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Islamic Liquidity Management Issues
Islamic Liquidity Management Issues
Delphi’s website contains:
Delphi’s website contains:
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
thoughts on liquidity
Background to Islamic liquidity
Background to Islamic liquidity
Background to Islamic liquidity
Background to Islamic liquidity
liquidity management
liquidity management
liquidity management
liquidity management
No Inter-bank market
No Inter-bank market
Risk Pyramid
Risk Pyramid
Risk Pyramid
Risk Pyramid
Risk Pyramid
Risk Pyramid
Risk Pyramid
Risk Pyramid
Conclusion & summary
Conclusion & summary
Conclusion & summary
Conclusion & summary
Conclusion & Summary
Conclusion & Summary

Презентация на тему: «Islamic Liquidity Management Issues». Автор: warren edwardes. Файл: «Islamic Liquidity Management Issues.ppt». Размер zip-архива: 388 КБ.

Islamic Liquidity Management Issues

содержание презентации «Islamic Liquidity Management Issues.ppt»
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1 Islamic Liquidity Management Issues

Islamic Liquidity Management Issues

ISLAMIC BANKING AND FINANCE Lebanese American University, School of Business, Irwin Hall, Beirut, Lebanon February 23–24, 2006 Warren Edwardes, ceo, Delphi Risk Management Limited e: we@dc3.co.uk w: dc3.co.uk

Warren Edwardes

2 Delphi’s website contains:

Delphi’s website contains:

articles on Islamic banking on: dc3.co.uk/ibnews The full speech will be on: dc3.co.uk/IslamicLiquidity060218.pdf with PowerPoint on dc3.co.uk/IslamicLiquidity060218.ppt

Warren Edwardes

3 thoughts on liquidity

thoughts on liquidity

More than listing Is there a buyer when you are a seller? More than negotiable At what price?

Warren Edwardes

4 thoughts on liquidity

thoughts on liquidity

British Gas Falklands War Dumping of Aaa A1-P1+CP Don’t hold paper in the news

Warren Edwardes

5 thoughts on liquidity

thoughts on liquidity

Midland Bank Crocker bank led to dumping of Midland CDs Don’t hold paper in the news

Warren Edwardes

6 thoughts on liquidity

thoughts on liquidity

Continental Illinois Plenty of “liquid” assets No diversification of liabilities mainly wholesale and few retail customers

Warren Edwardes

7 thoughts on liquidity

thoughts on liquidity

Access to determinate amount of cash When you need it Preservation of capital on demand Free from price risk Undoubted quality low credit risk and be seen to be so Need a quality Triple-A overnight instrument with stable capital values

Warren Edwardes

8 Background to Islamic liquidity

Background to Islamic liquidity

“Islamic banking is having a growth spurt. …. shortage of inter-bank liquidity, … signs that tentative moves are being made to address these shortcomings.” Middle East Economic Digest December 19, 1997 – over 8 years ago!

Warren Edwardes

9 Background to Islamic liquidity

Background to Islamic liquidity

Asset/liability gap management Shortage of instruments LMC /IIFM initiatives Numerous Sukuks including Malaysia, Bahrain & IDB Sukuks Liquidity and price transparency is required for an active secondary market Issues oversubscribed but minimal trading This lack of liquidity paradoxically increases the demand for liquidity

Warren Edwardes

10 liquidity management

liquidity management

Investments long dated – deposits are short massive gap Massive liquidity problem Need flexibility with Shariah compliance Sukuks held to maturity Short selling? Stock borrowing?

Warren Edwardes

11 liquidity management

liquidity management

LME Murabaha is main destination Bilateral transactions Counterparty limits Some funds exist But not capable of market size transactions Segmentation inevitable Co-operation needed with a market level solution

Warren Edwardes

12 No Inter-bank market

No Inter-bank market

Balance sheet management problem Cannot easily finance when there are withdrawals So more liquidity than needed by a conventional bank Bilateral Murabaha with break clauses is widespread liquidity vehicles cannot withstand a $100million injection or withdrawal

Warren Edwardes

13 Risk Pyramid

Risk Pyramid

Sound ALM requires a quality / liquidity pyramid. Most liquid is USD bill or note Nil earnings but price stability vs USD Then a range of bonds from super nationals to governments and funds Most with price risk Some with earnings volatility but fixed price No such highly rated Islamic instruments

Warren Edwardes

14 Risk Pyramid

Risk Pyramid

Governments reserves are in gold and government Triple-A paper Fiduciary or trust money should be both liquid and safe and price risk free Basle II is approaching Even before that sound risk management principles apply

Warren Edwardes

15 Risk Pyramid

Risk Pyramid

Pyramid of risk Blended portfolio from Triple-A down to Single-B Can interpolate risk between Triple A and Single-A Cannot extrapolate risk from lesser risks to triple-A

Warren Edwardes

16 Risk Pyramid

Risk Pyramid

Risk / return trade-off in conventional markets Add to this the Halal / Haram trade-off Need Triple-A Halal instruments

Warren Edwardes

17 Conclusion & summary

Conclusion & summary

Sukuks bought to hold minimal secondary market for on sale Mark to market and price determination is difficult Shortage of paper Is debt trading really Halal? Novation agreements Cancellation of original purchase and replacement with new owner in contract note

Warren Edwardes

18 Conclusion & summary

Conclusion & summary

Asset / Liability problem Long term asset fixed and short term variable deposits No derivatives – yet! Gharrar? Financial Takaful?

Warren Edwardes

19 Conclusion & Summary

Conclusion & Summary

Lack of short term instruments Sukuks are medium plus term Not price stable or really liquid Shortage of credit lines Wanted an overnight Triple-A, market-sized, liquid, inter-bank market solution where institutions can park their reserves

Warren Edwardes

«Islamic Liquidity Management Issues»
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