MANAMA: Mahmood Rafique, Editor: The global banking community has been urged to take appropriate, precautionary and practical steps to face the possible economic crisis in 2020.
“Many analysts expect the crisis to take place in 2020. The exact timing is not what matters most but what matters is why and how such challenge can be tackled,” Dr. Sami Al-Suwailem, Head of Financial Product Development Centre, Islamic Research and Training Institute, Islamic Development Bank in his keynote address during the 26th World Islamic Banking Conference 2019, said.
“Why would there be another major crisis, and how can it be avoided. Experts unanimously agree: It is because of excessive debt. Low interest rates since the onset of the global financial crisis in 2008 made it unusually easy for corporates and sovereigns to pile up debt,” Dr. Sami Al-Suwailem, said, adding the main question remains that how can we curb the growth of debt so that we can achieve sustainable stability?
“It must be clear from the beginning that stability is a public good. This means that, while the economy as a whole is better off in a low leverage environment, each market player has an incentive to deviate and add up leverage. But if everyone does the same, the economy stagnates and becomes susceptible to financial turmoil. It is a standard “fallacy of composition” problem. This means that curbing debt must be a collective endeavor. This is why the Basel Committee had to issue a new set of standards to make the banking sector more robust and resilient. To move from a high-debt to a low-debt environment requires a set of policies and regulations that encourage risk-sharing and participatory financing,” he added.
Held under the patronage of HRH Prince Khalifa Bin Salman Al Khalifa, the Prime Minister of the Kingdom of Bahrain, the WIBC has emerged the largest and most prestigious gathering of Islamic banking and finance leaders in the world.
The 26th edition of the WIBC was opened by HRH Prime Minister’s Advisor HH Shaikh Salman bin Khalifa Al Khalifa in presence of Rasheed Al Maraj, CBB Governor, dignitaries, industry leaders, bankers, policy makers and 1300 delegates.
“In the backdrop of rapidly growing e-commerce for goods and services through internet and mobile applications, the digital commerce sales are projected to reach US$4.6 trillion by 2022,” Godwin Emefiele, Governor, Central Bank of Nigeria, in his address said, adding “the global banking and financial landscape have evolved radically over the last few years.”
“These changes have been driven by impactful forces including regulatory changes, digitalization and technological innovations,” Governor, Central Bank of Nigeria, said while endorsing the Islamic finance entities which according to him thrive and grow globally and stressing on the way forward for the industry.
“While traditional banking institutions will remain relevant in mobilizing deposits, providing credits, and processing transactions, the conduct of financial services will continue to change drastically, reflecting major shifts in consumer expectations. Conventional banking with its rising cost of operations may be replaced by faster and more convenient financial gateways,” he said.
“As policymakers, we need to understand the emerging innovations that are most relevant to the evolving financial services industry. We also need to diagnose how innovations impact the ways in which financial services, particularly Islamic banking services, evolve over the long run. Thereafter, we need to determine the most optimal response of financial institutions and policymakers to these changes,” he said.
“The strongest shapers of the changing trends in the financial services industry today are the actions of public authorities, particularly in relation to regulation and supervision. Regulatory pressures arising from the 2008 – 2009 financial crisis increased the cost of capital, prompted large-scale divestment, and reshaped attitudes towards risk. Stability became a paramount concern for regulators, along with the development of proper risk management control systems.”
The first day of the conference also witnessed the Top Guru CEOs from the World’s largest Islamic Banking Assets Banks at the CEO’s Power Table Steve Bertamini, Chief Executive Officer, Al Rajhi Bank, Saudi Arabia, Dr. Adnan Chilwan, Group Chief Executive Officer, Dubai Islamic Bank, U.A.E., Mazin Al-Nahedh, Group Chief Executive Officer, Kuwait Finance House, Kuwait Mazin Manna, Group Chief Executive Officer, Abu Dhabi Islamic Bank, UAE.
“In its 26th year, WIBC continues to bring forth industry leading thought leadership and perspectives towards the progress of the broader financial industry in a time where advancements in technology and regulations are critical for the success of all key stakeholders. I feel that traditions should not be treated as shackles.”
“They should not restrict you from moving forward. Rather, they should serve as a platform for the next transformation. Banking stands at a crossroads today. The leaders of financial institutions in this highly dynamic and progressive world have to make the key decision now – to remain relevant to the demands of the customers or disappear. We are competing not just with entities within the sector but ambitious institutions from outside the traditional boundaries. So, it’s time to continuously be a part of the customers’ life – simple as that. Banking 2.0 (or Lifestyle Banking) is the only way forward,” Dr. Adnan Chilwan, Group Chief Executive Officer, Dubai Islamic Bank, UAE, said.
A key highlight of the day one of the conference was the Regulator’s Power Table focusing on New Markets and Harmonization of Global Islamic Finance Standards with Panelists include Khalid Hamad AbdulRahman Hamad, Executive Director of Banking Supervision, Central Bank of Bahrain (CBB), Bahrain, Suhaeidi, Executive Director, Department of Islamic Economic and Finance, Bank Indonesia, Indonesia, Farah Jaafar-Crossby, Chief Executive Officer, Labuan IBFC, Malaysia, Dr. Qais Al Yahyaei, Executive Vice President, Central Bank of Oman, Oman, Taliya Minullina, Chief Executive Officer, Tatarstan Investment Development Agency, Republic of Tatarstan.
Farah Jaafar-Crossby, Chief Executive Officer, Labuan IBFC, Malaysia discussed the perspective of harmonization of standards from the perspective of an international business and financial centre which aims to facilitate the growth, acceptability and cost efficiency of Islamic financial services, both in Islamic countries and beyond. She also invited all the delegates present to Kuala Lumpur in 2020, when Labuan International Business and Financial Centre will act as a strategic partner to the 8th edition of WIBC Asia will be hosted between 29-30th June. The jurisdiction, is home to the world’s first USD denominated exchangeable Sukuk and is keen to ensure Malaysia’s position as a leader in Islamic financial services is further entrenched with the hosting of WIBC Asia 2020.
Other key highlights from the day include the presentation on Global Economic Outlook by Dr Jihad Azour, Director Middle East and Central Asia Department, International Monetary Fund, Panel Discussions focusing on New Markets and Harmonization of Global Islamic Finance Standard, Digital Transformation: New Trends in Fintech, and Value Creation via M&A. Leading industry experts analyzed the challenges at hand and focused on coming up with effective suggestions with the ultimate aim of developing a convergence roadmap for the Islamic Finance industry at large.
Dr Jihad Azour, emphasised on the global headwinds being on the rise with lower growth and rising uncertainty, volatile and low oil prices, geopolitical risk and social unrest. He suggested it is time to address fiscal vulnerabilities – Resume gradual consolidation in OEs and ensuring debt sustainability in OIs.
The day one was concluded with Gala Dinner for the 26th WIBC where winners were announced by Adnan Ahmed Yousif, Chairman, Bahrain Association of Banks (BAB), President and Chief Executive, Al Baraka Banking Group, Bahrain. The Gala Dinner was attended by HH Shaikh Salman bin Khalifa Al Khalifa, Advisor to HRH the Prime Minister, Rasheed Al Maraj, CBB Governor and guests.
WIBC Performance Awards were presented by Rasheed Al Maraj, CBB Governor to the top performing Islamic financial institutions based on their performance in the WIBC Leaderboard – a groundbreaking performance assessment tool aimed at enabling Islamic financial institutions to benchmark their performance against their peers.
