Regulation and Supervision of sukuk markets Abu

Transcript:Regulation and Supervision of sukuk markets Abu:
Regulation and Supervision of sukuk markets Abu dhabi, UAE 20 April 2015 Sau Ngan Wong, Senior Counsel, Finance and Markets Global Practice The World Bank Group saunganwong@worldbank.org Agenda - IOSCO report on Islamic capital markets - Distinct features of Sukuk regulatory framework - Relevant standards issued by IFSB on Sukuk - Shariah governance framework - Regulation of non-sovereign primary issuance of Sukuk - Regulation of secondary market of Sukuk - Examples of country approaches to regulation of Sukuk - Key challenges to regulation & supervision of Sukuk markets Islamic Capital Market (ICM) constitutes a segment of the wider global securities market, the regulatory health and proper functioning of which falls within IOSCO’s objectives A capital market with a sound regulatory framework and appropriate supporting infrastructure must first be present in order to nurture and support an ICM component While conventional principles of securities regulation may be applied to ICM, there may be, in certain instances, a need for more specific guidelines to be introduced to ensure that the unique aspects of ICM products are appropriately regulated There is no need to formulate separate regulatory principles for ICM. By extension, IOSCO’s objectives and principles of securities regulation can be applied to ICM IOSCO Islamic Capital Market (ICM) Taskforce Report 2004 3 Universal principles of securities regulation equally apply to ICM & Sukuk 4 5 Fair, efficient & transparent framework applicable to Sukuk markets... Investors Issuers Conducive regulatory framework that ensures: Fairness Efficiency Transparency Investors’ protection Market returns Liquidity Timely access to relevant information Expeditious issuance process Lower funding cost Ability to borrow long Clear and consistent rules Governance principles peculiar to Islamic finance Fiduciary duties as Mudharib i.e. fund manager Shariah Governance Capital Adequacy Standard Risk Management Risk profiles & exposures determined based on underlying Shariah contracts Unique risks e.g. Shariah risk, rate of return risk, Displaced commercial risk & equity investment risk Corporate Governance Distinct features of Sukuk regulatory framework… Consumer protection & fair dealing Firewalls for Infrastructure Separate accounting, clearing and settlement system Separate prudential requirements – liquidity, single customer limit Transparency and disclosures Dispute resolution mechanism Rate of return framework Adapt existing sound practices to address Islamic Finance characteristics to minimize regulatory arbitrage… Capitalize on strength of conventional regulatory system Conventional regulatory infrastructure already in place & proven effective Leverage on existing framework to address similar risks in Islamic finance Islamic finance/Sukuk are governed by similar regulatory framework