Kuala Lumpur: The global Islamic financial system is now operating at a time when the international economic and financial environment is becoming immensely more challenging, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said.
She said new risks were more complex as more profound systemic implications were emanating with the increasing forces of several factors, including globalisation of technological environment and internationalisation of Islamic finance.
“Cumulatively, these developments necessitate greater prudential regulation and supervisory oversight to ensure resilient and sustainable financial system,” she said at the Islamic Financial Services Board (IFSB) Industry Engagement session here Thursday.
Zeti said Malaysian Islamic banks now had the potential to be better able to pursue their role as investment intermediaries through the offering of investment accounts in addition to the entrenched deposit products.
“This is supported by the legal recognition of investment accounts in the Islamic Financial Services Act 3013, which provides a differentiation between the deposit account and investment account which offers a new investment avenue that caters for a wider range of investor risk-return preferences,” she added.
In the development of investment account, Zeti said it would be essential for Islamic banks, investors and entrepreneurs to embrace the different approaches in the management of the risk and return relationships embedded in the variations of the Shariah contracts.
She noted that these relationships needed to be well understood by the parties involved as they were aligned with clear contractual and operational requirements.
Zeti said to date, eight Islamic banks were offering investment accounts to their customers.
More are expected to follow suit when the value proposition of such investment accounts, with its unique features and the different target market, become better understood, she added.
She said the industry-led communication by the Association of Islamic Banking Institutions Malaysia would contribute towards enhancing customer awareness of the concept and the key features of investment account.
“The latest establishment of a consortium developed by four Islamic banks to develop and operate the Investment Account Platform, which is to be launched next month, is also another initiative to advance this new offering,” she said.
Zeti said with greater readiness, Islamic financial institutions could strategically position themselves to further realise the true value proposition of Islamic finance, particularly as a financial regime that placed emphasis on risk-sharing.
“And that further strengthens the link of finance to the real economy,” she added.
She said industry players would be better positioned to ride the evolutionary waves of financial innovation that was prevalent in Islamic finance to enable greater offerings of risk-sharing products to customers and businesses.
Originally published on www.dailyexpress.com.my