Islamic banks unaffected by crisis, says head of Union of Arab Banks

The global financial crisis has failed to have any impact on Islamic banking said Adnan Ahmed Yousif, the President and Chief Executive Officer of Albaraka Banking Group and the head of the Union of Arab Banks.

Speaking at a Ramadan Majlis held at the Atlantis Hotel by Dubai Press Club and Albaraka Group, Adnan Yousif identified three separate blocs of Islamic banks: those in countries where the banking system is closed to external factors such as Libya, Syria and Iran; countries where there is limited flexibility to invest externally such as Lebanon and Egypt; and banks in the GCC where there are few restrictions.

While Islamic banks in the first two blocs have no exposure to the financial crisis at all, Yousif said that on a consolidated balance sheet basis overall, Islamic institutions in the GCC faced little impact from the crisis because they had no involvement in derivatives.

“But that does not mean we remain isolated from the rest of the world. It is indeed possible for the GCC countries to become more influential internationally. GCC will actually be the fifth major economic block in a few years provided they implement a common currency system and consolidated economic activity across the region further,” he explained.

Indeed he claimed Islamic banking as a remarkable success story against the backdrop of the general gloom in the financial sector, noting that Albaraka Group itself not only remained unaffected by the financial crisis, but also managed to increase profits this year.

Yousif said though the end of financial crisis had already begun, recovery will be slow. “Proactive government initiatives are a precondition to get over the financial crisis. The developed countries must listen to Asian countries to avert this kind of situations in future,” he demanded.

Commenting on the Saad/Algosaibi situation, Yousif said the central banks should exchange information about corporate debts to avoid future problems, “It is important that the debts of corporate entities be made globally public in order for banks to avoid giving risky loans. This is something very easy to implement as all central banks have the information at their disposal.”

Yousif added that he did not believe that the Saudi groups’ debts pose a major threat to banks in the GCC, noting that the Arab banks affected have already made provisions of 25-50 per cent against their exposure to the firms.

Link: http://www.cpifinancial.net/v2/News.aspx?v=1&aid=3265&sec=Islamic%20Finance