www.sii.org.uk

WCOA 2006 IstanbulIslamic Finance

16th November 2006

Ruth Martin

Managing Director

SII Involvement in Islamic Finance

Who we are

Setting professional standards

The IFQ

Educational standards as benchmarks for industry

Standards first or Qualifications first?

Key Information Origins in London Stock Exchange Setting

professional standards

A not-for-profit organisation

Board of Trustees

85 Full-time Staff

25,000 individual members

8,000 student members

38,000 exams each year

10,000 publications sold pa

International offices

53 countries

““““ To set standards of professional excellence and integrity for the

securities and investment industry, providing qualifications and promoting the highest level of competence to our

members, individuals and firms

Mission Statement

Three Main Activities:

KNOWLEDGE: An Awarding Body for Qualifications

SKILLS: A provider of Continuing Professional Development

BEHAVIOUR: A leader in Integrity & Ethical thinking

Who Takes our Qualifications?

Aviva

Barclays

Citigroup

Credit Suisse

Deutsche Bank

Goldman Sachs

HSBC

J P Morgan

Lloyds TSB

Merrill Lynch

Morgan Stanley

Nomura International

UBS

Alliances

Alliances & Partnerships vital

Firms

Training Deliverers

Professional bodies

Exam delivery partners

Islamic experts

A wide range of qualifications in the UK Financial services Industry

Used by firms to satisfy the Regulator to ensure staff are competent

Supported by HM Treasury

On the appropriate list of the UK Government’s Financial Services Skills Council (FSSC)

An approved Awarding Body by the UK Government regulator in Education, the QCA

Reputation as Centre of Excellence

Securities & Investment Institute

Setting Professional StandardsSetting Professional Standards

Continuing personal and professional

development

Knowledgeand

understanding

Skillsand

experience CompetenceCompetence

Why a UK Professional Body for the Islamic Finance Qualification?

Professional bodies focus on the conduct of the person as well as the passing of exams

The beliefs and philosophies underpinning Islam are totally synergistic with the professional body ethos

SII experience of setting Regulatory exams for Middle East Regulators

As the UK professional body for the Investment industry, this led to SII involvement in IFQ

SII familiar with working to national standards; deliver leading compliance exams in UK for FSA

SII’s respect for necessary involvement of Islamic finance practitioners and training skills: partnership with the Ecole Superieure des Affaires – the Leading Business School in the Middle-East

Initiated by Leading Central Bank - Banque du Liban

Partnership with leading Business School in Middle East - ESA

Advisory council for Islamic Finance

SII leader in conventional investment banking standards of competence

SII leader in ethics and integrity for investment sector

ESA successful experience in Islamic Finance Through its foundation for research and development in Islamic Finance: “Al Multaqa”

Draw on experience working with Government regulators in Egypt, UAE, Saudi Arabia, Dubai, Lebanon

Recognition of value of wide spectrum of Islamic finance specialistsand authors from many countries

Islamic Finance Qualification Islamic Finance Qualification An added-value for a fast growing industryAn added-value for a fast growing industry

What is unique about IFQWhat is unique about IFQ

Islamic ExpertiseIslamic Expertise + Training and Education expertise

Training and Education expertise = IFQ

Islamic Finance from both a technical perspective and Sharia’a perspective

Existing employees

New employees

Young people seeking a career

Muslims and non Muslims

Tested globally by Computer

IFQIFQSetting international benchmark accessed by all

Available from March 2007

Dr Abdul Sattar Abu Ghuddah Dr Ahmad Jachi

Dr Mohamad Nedal Alchaar Mansoor Shakil

Professor Simon Archer Samir Salameh

Stella Cox Abdulkader Thomas

Michael Saleh Gassner Brian Kettell

Imane Karich Dr Mohammed Imran Usmani

Jean-Marc Riegel Samer Hijazi

Ahmad Sabbagh Paul Sherrin

Waheed Qaiser

Training and examination assessment expertise from ESA and SII Staff

Qualifications can……..

Benchmark standards

Provide the foundation for measurable continuous learning regimes

Combine knowledge, skills and behaviour

Be used for ‘Approved Persons’ regimes to ‘police the perimeter’ of Financial Services

Become a global standard

Save many years of conventional standard setting in the field of personal and professional competence

‘Licence practitioners’

Islamic Finance Qualification (IFQ)

Combines the expertise of Islamic scholars and banking practitioners, Trainers and Business School leaders with the traditions of UK Professional Body standard setting for ethical conduct in the investment sector

Is available globally using the latest assessment technology

Is supported by major banks and finance institutions

Is a practical qualification blending knowledge and application

The IFQ – what does it cover?

The basis of Islamic banking and finance

Islamic law of contracts

The major contracts – Mudaraba, Musharaka, Murabaha, Ijara, Salam, Istisn’a, etc..

The accounting treatment of Islamic Finance Institutions: financial transactions according to IFRS and AAOIFI financial accounting standards

Corporate governance for Islamic Finance Institutions

Islamic asset and fund management

Islamic Bonds - Sukuk

Islamic insurance - Takaful

IFQ – Highlighting new standard setters (1)

Regulatory and prudential Standards:

The Islamic Financial Services Board (IFSB):

Corporate governance,

Risk Management,

Capital adequacy etc..

IFQ – Highlighting new standard setters (2)

Accounting & Sharia’a standards:

Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)

Need for new accounting standards which include new dimensions such as:

• Religious & Ethical dimensions as a matter of religion

• New Accounting classes such as the Investment Account Holders. The latter are (to a certain extend) similar to depositors in conventional banking

Sharia’a supervisory Board Report which is not included in Institutions financial reports and notes.

Potential accounting challenges

Islamic Finance Institutions apply different accounting standards according to local regulations:

Different reporting policies,

Potential extra work needed for consolidation of subsidiaries’ accounts,

Potential transparency challenge for shareholders and investors (mainly Islamic Account Holders),

Big challenge for Islamic Finance Institutions who are looking to expand globally.

Challenge in case Islamic Finance institutions decide to go public,

Why potential resistance for new standards?

Extra work required from Islamic Finance Institutions,

Requires new knowledge and expertise of both regulators and practitioners:

Need to develop the expertise of the Islamic Finance industry,

Need to develop the knowledge and understanding of employees

Need for more global qualification: the IFQ

An International

BenchmarkQualification

IFQ

StandardsStandardsHarmonisation Harmonisation

Regulatory & Regulatory & Prudential Prudential standards standards

(IFSB)(IFSB)

PromotingPromotingGlobal GrowthGlobal Growth

In Islamic In Islamic FinanceFinance

Accounting & Accounting & Sharia’a Sharia’a

standardsstandards(AAOIFI)(AAOIFI)

ProductProductInnovation Innovation

MeetingMeeting

CustomerCustomerNeeds Needs