simon gray by 0N4nG1Kh


									  Emergent Hubs of
Islamic Finance - The
    Regional View
            Simon Gray
       Director, Supervision
 Dubai Financial Services Authority
              Competing for International
             Investment - The DIFC Region
         • Rapid growth – Emerging market

                                   DIFC Region

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         Dubai International Financial Centre
                    (DIFC) Region

                    Fills gap between Europe
                             and Asia


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                   DIFC Region - A Favourable
                     Economic Environment
         •   DIFC Region combined has approximately two third’s of world’s
             proven oil reserves.

         •   Sharply rising oil prices have resulted in enormous increases in
             export earnings, budget surpluses and current account surpluses
             for oil producing countries.

         •   Current account surpluses running at 20-25% of GDP much of
             which is being recycled back into regional economies.

         •   Increased liquidity resulted in an investment driven boom, as
             witnessed by:
               – Real estate boom
               – Stock market boom
               – Credit market boom

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            DIFC – Objective is to become
            global hub for Islamic Finance
         • Like any other product, the growth of
           Shari’a compliant products is largely driven
           by the demand in Muslim countries. (DIFC

         • DIFC is facilitating the growth of Islamic
           Finance in the region and beyond, by
           fostering greater international linkages and
           cross border transactions.

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                Characteristics of the DIFC

         Financial Free Zone
          Foreign Currency Denominated / Zero Tax Rate
          Wholesale Centre for Qualified Investors
          Onshore Capital Market / International Standards
          No Local Partner Requirements
         Co-operation With Other Local and International

         Legal Jurisdiction
          Independent Judiciary
          Tailor Made Laws for the DIFC.

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                        The Structure of the DIFC
                                       Dubai International
                                        Financial Centre

                                         Dubai Financial                 DIFC
            DIFC Authority
                                        Services Authority         Judicial Authority

         Provide overall direction     Independent integrated     Own Court system with
         for the development and     Regulatory Authority with       DIFC Laws and
          marketing of the DIFC.     risk- based regulations on   Regulations applicable
                                        par with International       within the DIFC.

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           Convergence helping emergence

         Islamic Windows and Islamic Financial Institutions
          Shari’a systems approach to regulation.
          DFSA requires the same degree of transparency
           and disclosure for Islamic transactions as we do for
           conventional products.
          What role are Western financial institutions playing
           in the development of Islamic finance?
          Organizations like the IFSB and AAOIFI play an
           important role in dealing with issues of

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          Accomplishments that demonstrate
           DIFC as a global hub for Islamic
          Banking and Non-Banking Islamic Financial
          International financial centre offering Shari’a compliant
          DIFC has the proximity to a large proportion of Islamic
           wealth and a major customer base.
          The ability to attract and develop a pool of Shari’a
          International Islamic Finance Advisory Council
          1st EMBA in Islamic Finance in the world.

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            Accomplishments that demonstrate
             DIFC as a global hub for Islamic
           The Dubai International Financial Exchange (DIFX) is the
            world’s largest market for Sukuk. It has 44 % of the world’s
            Sukuk by listed value.

           The DIFX Sukuk include the 2 largest in the world:
               $3.5 billion listing from the ports customs and free zone
                corporation and;
               $ 3.52 billion offering by Nakheel Development.

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          DIFC - Key Success Factors

             Strategic Leadership

             Human Capital Resources

             Corporate Culture

             Regulatory Framework

             Financial Resources

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          DIFC - Challenges and Opportunities

                 Islamic Finance

                 DIFX and DME

                 Physical Plant

                 Current Market Conditions

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              Additional challenges

          •   Developing new standards to prepare for the future to ensure
              stability and soundness of the Islamic Finance industry in addition
              to completing the range of the prudential and supervisory
              standards of Islamic Finance Institutions like:
               – Work in the area of supervisory review process
               – Market disciplines
               – Corporate governance and transparency.
          •   Developing suitable Shari’a compliant products with the qualities
              of the conventional ones.
          •   We have to highlight here the innovative work being done by the
              Islamic Financial Services board in that regard where the IFSB
              have approved 2 important standards in 2005
               1. Capital adequacy
               2. Risk management

               DFSA active participants in IFSB Working Parites – more WIP.

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             Initiatives and Future Outlook

           Internationally accepted authority
           National and International Islamic accounting standards
           Standardisation and consolidation
           Regional Financial Centres
           Legal Implications
           Tax Issues
           Mutual Recognition

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