Jeddah, KSA, 24.12.2012 – The Islamic Development Bank (IDB) Group’s research and training arm, IRTI (Islamic Research and Training Institute) hosted a joint consultative meeting on Risk Management in collaboration with GARP (Global Association of Risk Professionals), a leader in global financial risk testing and certification programs. Other IDB Group departments such as IFPDC (Islamic Financial Product Development Center) and GRMD (Group Risk Management Department) collaborated in the event
held at the IDB Headquarters.
The event mainly sought to achieve four objectives: i) to identify issues considered important to market players, regulators, stakeholders, Shari’ah scholars and researchers; ii) to identify risk management and measurement tools applicable to Islamic financial institutions in accordance with Shari’ah principles; iii) to serve as a basis for further policy and technical discussions with stakeholders of the Islamic financial industry, and iv) to provide a market review as a basis to determine a
priority for the development of risk management framework. The participants also discussed prioritizing the development of practice driven risk management standards which will allow for more rapid implementation of the general principles enunciated by the Islamic Financial Services Board (IFSB), the international standard setting body that promotes and enhances the soundness and stability of the Islamic financial services industry.
Given the background of GARP in risk management and the rich background of IDB in Islamic finance, the two institutions are expected to come up with a road map on how to address Islamic finance-related risk management issues. Since 2011, IRTI and GARP have been discussing a joint pilot project to map and measure risks in Islamic financial products to develop practice driven learning material for risk professionals. “This joint effort will be fruitful for the industry as a whole”, explained Dr.
Ahmed Jachi, Chairman, Islamic Finance at GARP adding; “Islamic banks performed in a better way than conventional banks in terms of the effects of the global economic crisis. However, at the end of the day, there are risks whether you are Islamic or Conventional. If Islamic banks address these issues more properly, they may be in a better position than the Conventional banks.”
Dr. Azmi Omar, Director General, IRTI, on the occasion emphasized the need to come up with an integrated set of principles and best practices for managing risks in Islamic banking and to disseminate it at a global level.
To begin with, IRTI and GARP are to initiate a pilot project on risk mapping measurement and mitigation of Murabahah instrument. The scope could be extended to other instruments after the successful conclusion of the pilot project. The participants at the meeting further expressed willingness, with no binding commitment, to help in the project by sharing information, providing advice and insight for the successful completion of the pilot project.
The event was attended by 30 delegates from 13 entities including the World Bank and the International Monetary Fund (IMF); regulators from State Bank of Pakistan, Bank Indonesia, Central Bank of Kuwait and Bank Negara Malaysia, Bank Muamalat Indonesia, Bahrain Islamic Bank, Jordan Islamic Bank, Saudi Economic and Development Company (SEDCO) Holding, the National Commercial Bank (NCB), representatives from IDB Group entities and Path Solutions (a leading software provider for the financial
services industry with special focus on Islamic banking).