Islamic Banking Developments

The new Basel capital Accord is creating headaches for banks around the globe. However, Middle Eastern institutions that offer Islamic banking products have even more hurdles to jump. By John Ferry

"A major issue for Islamic banks under Basel II is a clear understanding of the particular risk characteristics of Islamic financial products. Are they loans and deposits, or are they to be treated as equity - or indeed, as loan/equity hybrids? What is the true nature of asset backing? Are the products equity-like profit and loss sharing products, or mark-up leases and sale and repurchase agreements? Are they bank liabilities, or is the bank a fund manager?" asks Warren Edwardes, Basel II consultant and chief executive of Delphi Risk Management, a London-based consulting and training firm. "The answer to these questions will make a big difference to the capital backing required."

Warren Edwardes is CEO of Delphi Risk Management, the London-based financial product creativity, communication and control consultancy.

Warren was previously on the board of Charterhouse Bank and has worked in the treasury divisions of Barclays Bank, British Gas and Midland Bank. He first researched into what were later to be called "derivatives" in 1975 and was part of the team that executed one of the world's first currency swaps in 1981. Since then he has devised and transacted numerous structures that form part of the history of derivatives. Warren can be contacted via we@dc3.co.uk

Warren Edwardes <note spelling of edwardes> is author of best seller "Key financial instruments: understanding and innovating in the world of derivatives" which includes an appendix on Islamic Banking. see http://dc3.co.uk/kfi

Edwardes is a Board Governor of The Institute of Islamic Banking & Insurance

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