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BankMuscat workshop spotlights Islamic liquidity management, capital market

Robust regulatory framework on anvil for Islamic banking operations in Oman

MUSCAT, 5 May 2012 – The ‘Islamic Liquidity Management and Capital Market’ workshop hosted by BankMuscat’s Meethaq Islamic Banking in association with International Islamic Financial Market (IIFM) got off to a fine start on Saturday (5 May 2012) under the auspices of His Excellency Hamoud bin Sangour al Zadjali, Executive President of the Central Bank of Oman. The opening ceremony of the 2-day workshop at BankMuscat head office was attended by dignitaries, including His Excellency Abdullah Al Salmi, Executive President of Capital Market Authority, Sulaiman bin Mohamed Al Yahyai, Vice-Chairman of BankMuscat, and AbdulRazak Ali Issa, Chief Executive of BankMuscat.

Aimed at knowledge-sharing by leading Islamic finance industry representatives and regulators, the main objective of the workshop is to identify best Islamic finance practices that can be adopted in Oman. Patronised by the Central Bank of Oman (CBO) and Capital Market Authority, the workshop is attended by representatives of reputed global Islamic finance organisations and banks.

His Excellency Hamoud bin Sangour al Zadjali said: “The workshop on Islamic Liquidity Management & Capital Market, organized by BankMuscat and IIFM, is well conceived, featuring relevant topics covering the regulatory, operational, liquidity and risk management issues, besides trends in Sukuk market and the extremely important topics on financial stability and credit enhancements. Islamic banking is fast growing globally but still evolving in terms of new ideas, standards and practices on regulatory and operational aspects. Regulators are trying to make the regulatory framework for Islamic banking as robust and practical as possible in Oman. While best possible adaptations may be made, they must also be acceptable to the market, hence it will be an evolving process. All of us will continue to be receptive to benefit from each other.”

His Excellency Hamoud bin Sangour al Zadjali added: “The Sultanate, commencing Islamic banking at this time, is in an advantageous position to learn from others’ experience. As a late starter, it will have its own new perspectives too. Interactions such as the workshop on Islamic liquidity management facilitate creating good understanding, awareness and knowledge on Islamic banking for all concerned, including the general public. Such exchanges are beneficial to all to share experience and expectations and appreciate complexities. This is part of change management. We congratulate BankMuscat for this initiative.”

AbdulRazak Ali Issa said: “BankMuscat is delighted to host this workshop under the patronage of the Central Bank of Oman and the Capital market Authority. The workshop assumes importance against the backdrop of the prevailing global financial crisis, reiterating the fact that a strong capital base is necessary for banking and financial institutions, but on its own is not a sufficient condition to ensure stability. A strong capital base must be supplemented by strong liquidity tools. The workshop is premised on this scenario to further support the growth of Oman’s Islamic finance system to be a resilient and sustainable system.”

AbdulRazak Ali Issa added: “As Oman’s leading financial services provider, BankMuscat is well positioned to provide Islamic financial expertise to diverse segments and thereby promote the good of society as a whole. The Meethaq Islamic banking has in place a comprehensive strategy to effectively respond to the directive of His Majesty Sultan Qaboos on Islamic banking and thereby cater to the financial needs of people in accordance with the guidelines and regulatory framework to be prescribed by the Central Bank of Oman (CBO).”

Sulaiman Al Harthy, Group General Manager – Islamic Banking, BankMuscat, said: “The main focus at the workshop is to identify instruments which facilitate liquidity management for Islamic banks as well as help achieve a reasonable commercial return and also fulfill their traditional role of financial intermediation between depositors and productive activity such as financing. Analogous to conventional counterparts, Islamic banks are also required to manage their liquidity risks. Presently, most of the liquidity management tools available in the market are either ‘Shariah-controversial’ in nature or based on Riba. One of the challenges is to allow liquidity to be managed while still permitting banks to invest.”


Al Harthy added: “There are two main issues for Islamic banks in managing their liquidity, especially in the short-term and to some extent in the long-term. One is the lack of a developed global Islamic money market, especially an Islamic interbank market, of the kind seen in conventional finance; the other is the shortage of short-term to long-term, or highly tradable, investment instruments with limited capital risk and, ideally, predictable returns. On the other hand, the Islamic finance industry is also pondering whether it should develop Islamic derivative / hedging instruments.”


The workshop noted that the overall advancement and growth of institutions offering Islamic financial services rely on the effective functioning of Islamic capital markets that are suitable for trading Shariah compatible securities.

“This means that we should have markets for long-term financial instruments that are both tradable and Shariah compatible. Such Islamic capital markets need not be confined to Shariah compatible securities,” Al Harthy said.

The workshop is focused on topics ranging from ‘Role of regulators and standard setting bodies’ to ‘Trends in global Sukuk Markets’, designed to be practical with ideas and solutions, experiences and examples to encourage participation and exchange of information.

AbdulKader Thomas, CEO, SHAPE Financial Corp, Kuwait, made a special address on ‘Islamic Financial Services Industry – Its evolution, journey, growth, trends and future direction’. He also moderated the first session on ‘Islamic banking, Basel III and the role of Central banks and Standard Setting Bodies’.

Ismail Dadabhoy, a Dubai-based independent Islamic banker was the moderator in a session on ‘Islamic Inter-Bank Market – Liquidity Management Tools’.

Simon Eedle, Managing Director, Credit Agricole CIB and Vice Chairman of IIFM, was the moderator in a session on ‘Risk Mitigation in Islamic Finance – A Market Perspective’.

Sohaib Umar, Executive Manager, Islamic Financial Services Group, Ernst & Young, will be the moderator in sessions on ‘Shariah Panel Discussion’ and ‘Financial Stability, Structures & Credit Enhancement in Islamic Financial Market Products & Services’ today (Sunday 6 May).

The group of expert presenters and panelists from the GCC and Far East region include some of the leading industry practitioners - Abdullah Haron (IFSB), Ijlal Ahmed Alvi (IIFM), Dr. Mohammed Daud Bakar (Amanie Advisors), Faheem Ahmad (IIRA), Mark Pritchard (NBAD), Shaikh Muddassir Siddiqui (ISRA), Daniel Cookson and. Mark Dickinson (Clifford Chance), Hatim El-Tahir (Deloitte) and Sheikh Kahlan Al Kharusi (Assistant Grand Mufti of Oman).

“BankMuscat is delighted to organise this specialised event in Oman with the co-operation and support of the Central Bank of Oman, Oman Capital Market Authority, leading banks and IIFM, the leading standard setting body in Islamic finance, to facilitate the development of Islamic capital and money market in Oman,” Sulaiman Al Harthy added.