by Habhajan Singh
At least two out of three Islamic finance industry leaders in the Middle East reg ion be l ieve t hat t he fast-growing financial sector is under regulated, a survey revealed. Some 31% of the Islamic Finance leaders from Saudi Arabia, Bahrain, UAE, Qatar and Lebanon surveyed by Deloitte believed that the Islamic Finance industry is appropriately regulated, majority (66%) indicat ing that it i s under regulated. Only 3% said it is over regulated.
"This result is consistent with the previous findings relating to the level of supervision and financial regulation in the GCC (Gulf Cooperation Council)," said the first of Deloitte's Islamic Finance leaders survey in the Middle East benchmarking practices.
The report noted that its findings also confirm the compelling need for an enhancement to the regulatory environment promoted by organisations like Islamic Financial Services Board, Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions and International Islamic Financial Market.
A copy of the survey, which excluded industry players from this part of the world, was made available to The Malaysian Reserve. Deloitte said it was the the first Islamic Finance leaders survey in a biannual series targeted at industry practitioners and leaders of Islamic financial institutions (IFIs) in the Middle East. It was based on interviews conducted with indust ry leaders between April and June 2010.
Islamic accounting standards and risk management were identified as the top two areas requiring new regulatory measures, and the leaders surveyed, view corporate governance and Shariah governance as prerequisites for best practices. It also noted that current and anticipated regulatory changes are the chief drivers of the business performance of IFIs.
It said the majority of industry leaders surveyed (84%) noted that within the next year,Islamic finance regulation will increase significantly.
"This is consistent with regulatory reforms that have recently taken place around the world. Includes are the US Securities and Exchange Commission's new rules requiring a large amount of disclosure about the information used to securitise notes," it added.
It noted that the European Commission has made similar moves. Reforms cited included new measures in Basel III to tighten core tier one capital, Ireland's new laws limiting bank credit exposures and exposures and the UK's bank tax levy. Bank Negara Malaysia (BNM) will also be introducing a new Shariah Governance Framework soon.
