CBB’s Islamic liquidity instrument to fuel banking business

June 2, 2015 8:02 AM

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MANAMA: The new Islamic Sukuk Liquidity Instrument (ISLI) recently introduced by the Central Bank of Bahrain will play a vital role in enhancing return for Al Salam Bank-Bahrain and boost its profitability and would lead to the overall national economic development of the Kingdom of Bahrain, a senior banking figure has confirmed.

“ISLI will play a vital role in enhancing the economic return of our banking activities through smoothing the deployment of excess funds in high creditworthiness scheme, which will also contribute to the Islamic banking industry by offering a wider range of short term quality assets available for the banks to support their long term economic growth,” Yousif Taqi, Director and Group CEO of Al Salam Bank-Bahrain said.

Al Salam Bank-Bahrain, one of the pioneering Shari’a-compliant banks in the Kingdom, is amongst the first users of the new Islamic Sukuk Liquidity Instrument that was recently launched by the Central Bank of Bahrain on 1st April 2015.

“We believe that using ISLI will facilitate to boost our profitability, add further flexibility in the management of the available liquid funds in the banking system and thus would lead towards the achievement of the overall national economic development within the Kingdom,” Taqi added.

Previously, Islamic banks in Bahrain have focused on managing their short-term liquidity through the Central Bank’s monthly Sukuk issues program of 3 and 6 months Sukuk. Through this new launch, the Central Bank of Bahrain granted all Islamic retail banks in the Kingdom the opportunity to take advantage of an innovative liquidity management instrument in order to deploy their excess liquidity as a Wakala deposit on a weekly basis, every Tuesday, whereby the excess funds are invested in a portfolio containing high quality Sukuk, consequently helping to manage the Bank’s available cash more efficiently.

“In addition, ISLI will also bring positive returns to our clients on short-term deposits as well as help in accomplishing the upcoming Basel III liquidity requirements especially on the High Quality Liquid Assets (HQLA) given to the nature of the weekly deposits and the risk-free cost associated with it,” Taqi, said.

Source: twentyfoursevennews.com

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