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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    Standard & Poor's: Gulf governments take time to implement banks' liquidation regulations

    Rocky
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    • Post n°1

    Standard & Poor's: Gulf governments take time to implement banks' liquidation regulations Empty Standard & Poor's: Gulf governments take time to implement banks' liquidation regulations

    Post by Rocky Mon Feb 12, 2018 6:34 am

    Standard & Poor's: Gulf governments take time to implement banks' liquidation regulations





    2018/02/12 11:48

    (Encyclopedia of this Day News | Iraq News ) - Dubai directly: Gulf banks applied regularly many of the best international practices and regulations in the Standard & Poor's credit rating , said in an interview that the report when it becomes a window.

    The report, entitled "Credit Restoration and Liquidation Systems for Banks in the Gulf Region: Many Questions and Few Answers", "but governments in the Gulf region take time to apply banking liquidation regulations."

    Although the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) have taken many of these steps, they are still far from implementing banks' liquidation regulations in both conventional and Islamic banks, Standard & Poor's.

     The application of bank liquidation systems requires a major change in the way governments think and approach their banking systems and to the credit rating agency.

    The credit rating agency believes that most Gulf governments are currently heavily supporting their banking systems.

    Qatar recently provided significant support to its banking system after the massive withdrawal of foreign funds from Qatari banks following the imposition of sanctions on Qatar by some Arab countries.

     For Islamic banks, the issue of compliance with Shariah provisions poses an additional challenge in the application of bank liquidation systems and the carrying of creditors to loss, according to Standard.

    "In response to the global financial crisis that required urgent and extraordinary action, the G-7 finance ministers agreed to take decisive action," the Standard & Poor's report said.

    "The standoff came with all the means available to support some of the financial institutions that are important to the banking system of these countries and to prevent their collapse," S & P said.

     As part of the reforms undertaken by these countries after the global financial crisis, in order to reduce the need for government intervention and related costs for taxpayers, regulators have improved their oversight and supervisory methodologies.

    S & P added that these countries have renewed on-site inspections, and have also expanded their toolkit to address liquidation regulation in many countries.



    Note: S & P: Gulf governments take time to apply banking filtering systems. First published on Mubasher website. The encyclopedia of this news day is not guaranteed in any way. 
    You can see the details of this address (Standard & Poor's: Gulf governments take time to apply banking filtering systems) through its original source any site (live website).




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    • Post n°2

    Standard & Poor's: Gulf governments take time to implement banks' liquidation regulations Empty Standard & Poor's: "Gulf banks have many questions and few answers"

    Post by Rocky Mon Feb 12, 2018 6:40 am

    Standard & Poor's: "Gulf banks have many questions and few answers"

    Standard & Poor's: Gulf governments take time to implement banks' liquidation regulations News-default 12 February 2018 11:32 p

     DUBAI - Standard & Poor's Ratings said in a recent report on the status of Gulf banks and highlighted the challenges they face in restoring and improving their creditworthiness .
    The Standard & Poor 's report , which received a direct version , entitled : " restore the creditworthiness of banks and the liquidation of the systems in the Gulf region: a lot of questions and few answers ."
    "Gulf banks regularly apply many best practices and international regulations when they become effective, but governments in the Gulf region take time to apply banks' liquidation regulations," the agency said in the report .
    Faced with the global financial crisis that required urgent and extraordinary action, the G-7 finance ministers agreed to take decisive action by using all available means to support some important financial institutions for their banking system and prevent their collapse .
    As part of the reforms undertaken by these countries after the global financial crisis, in order to reduce the need for government intervention and related costs for taxpayers, regulators have improved their control and oversight methodologies and renewed on-site inspections .
    They have also expanded their toolkit to address liquidation regulation in many countries .
    Although the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) have taken many of these steps, they are still far from applying bank liquidation regulations in both conventional and Islamic banks .
    The application of bank liquidation systems requires a significant change in the way governments think and approach their banking systems. According to the Isande B Global Credit Rating Agency, most Gulf governments are currently heavily supporting their banking systems .
    For example, Qatar has recently provided substantial support to its banking system after the massive withdrawal of foreign funds from Qatari banks following the imposition of sanctions on Qatar by some Arab countries .
    For Islamic banks, the issue of compliance with Shariah provisions poses an additional challenge in the application of banks' liquidation regulations and the bearing of creditors for loss .
    It is only a matter of time
    As far as we know, none of the six GCC countries has made significant progress in implementing credit restoration and bank liquidation systems .
    According to the Financial Stability Board, Saudi Arabia, a member of the G-20, still has to submit a draft liquidation law for public consultation .
    The implementation of creditworthiness and bank liquidation systems, in our view, requires a profound change in the way governments think and approach to support their banking systems .
    Gulf governments, not only as shareholders but also to protect the financial stability of their banking systems, have been reluctant to intervene aggressively to save banks .
    The last intervention in the region was when Qatar injected $ 43 billion into its banking system until 31 December 2017 to help curb the repercussions of the withdrawal of foreign funds following the boycott of several Arab countries by Qatar .
    The Qatari authorities also intervened in 2009 when they injected capital into Qatari banks to help them cope with the decline in the stock market and property prices .
    Another example is the UAE Ministry of Finance depositing US $ 19 billion in UAE banks in 2008, which was later converted into additional capital instruments .
    Similarly, the Abu Dhabi government injected $ 4.3 billion in new capital into its banks in 2009 .
    Investors have long considered government support to be a stabilizing factor for banks' creditworthiness, given the strong balance sheets of some GCC governments .
    However, Gulf states are often among the first countries to implement international standards, and therefore believe that their application to creditworthiness and bank liquidation systems is only a matter of time. But the question remains how long it will take .
    For conventional banks, it is likely to be easy to identify the recoverable debt and may consist mainly of contractually binding instruments to absorb losses at a specified stage ( whether at or prior to the point of inability to meet the obligations ).
    Most of the recent increases in capital in Gulf banks have created hybrid tools that can accommodate loss rather than injecting capital .
     For Islamic banks, compliance with Islamic Shari'a may complicate the application of creditworthiness and bank liquidation systems .
    The complexities faced by Islamic banks
    There is a general perception that creditworthiness and bank liquidation systems should be easy to implement in the Islamic finance sector, since the fair sharing of profits and losses among the transaction partners is one of the main principles of Islamic finance, which means that the absorption of loss is normal and automatic. But we recognize that the issue is more complex for these reasons :
    · Banks conduct some operations in a debt-like format .
    • Coverage of losses other than those incurred in specific underlying assets is not possible in accordance with Islamic principles .
    · The types of tools that can be used to absorb loss are unclear .
    · Asset transfer can cause a problem .
    Since the aspects of Islamic finance mimic debt contracts, these instruments are likely to be classified at the bottom of the bottom of the list of instruments for loss (ie, their capacity to absorb the loss will probably be very limited ) or they will be completely excluded, To absorb the loss recommended by the Islamic Financial Services Board .
    Shared investment accounts in murabaha-based profits expose account owners to the risk that the bank will not be able to meet its promise to pay capital or compensation .
    Similarly, the customer in current account operations is exposed to the risk that the bank will default on the asset. Finally, the Sukuk with the contractual obligations of its sponsor, which covers periodic distributions, and the principal of the loan, classified as unsecured initial bonds, will be subject to the same type of risk .
    Islamic banks can not use the capital of participating investment accounts in speculative profits to support losses from activities financed from other sources. In Islamic finance, the capital of an investment account participating in speculative profits must theoretically cover losses incurred in the underlying assets .
    In fact, banks have developed techniques to reduce the risk of joint losses with their customers in order to prevent liquidity risks (such as the risk of mass withdrawals from banks) or the deterioration of the customer base .
    These include retention of profit equalization reserves or investment risk reserves. This means that if a bank reaches the liquidation stage, the activity that was financed through the investment accounts participating in the Mudaraba-based profits should be excluded from absorbing the loss, assuming that the source of the losses that led to the bank's failure was not the activity. Under the latter scenario, the strict application of Shariah provisions means that the holders of the investment accounts participating in the profits will bear the losses .
    Taking into account the possible impact of the application of IFRS 9 - IAS 30 - we expect :
    · A real separation between the management of investment accounts involved in Mudaraba-based profits and other types of financing (such as the separation of activities financed by profit-sharing investment accounts from activities financed from other sources that require profit-sharing investment accounts to participate effectively in losses if required) ).
    • The attractiveness of joint investment accounts in the Mudaraba-based profits in the medium term has declined in both the customers and the banks themselves .
    In addition, distinguishing debt instruments that can absorb loss from other debt is not a difficult task .
    The logic used in profit-sharing investment accounts can also apply to speculative instruments used to acquire specific assets, unless the Mudaraba Agreement is mentioned as being part of the general asset set of banks .
     While it is easy to distinguish instruments of participation because they are similar to net equities .
    Furthermore, it is possible, in accordance with Islamic principles, to convert assets that have debt-like characteristics from one entity to another only in the equivalent value (or without deduction ).
    This complicates the management-led credit recovery plan, or liquidation decision, under which certain assets and liabilities of the troubled bank must be transferred to a viable entity .
    What banks will need to be put into practice?
    We believe that the application of creditworthiness and bank liquidation systems in countries where Islamic finance accounts for a large part of the market can provide regulators with an additional tool to help stabilize the financial sector .
    As we have seen in Europe and the United States, once creditworthiness and bank liquidation systems are in place, they become a reliable alternative to bailouts, which in turn helps maintain financial stability .
    Similarly, we see an emerging paradigm in other countries, such as Hong Kong, where regulators have introduced the liquidation system as a new additional instrument, even though it appears that the likelihood of the Government providing initial debt support will remain .
    This approach may also support financial stability, and at this point we can not confirm which way the Gulf governments will go .
    For Islamic banks in particular, we believe that the effective application of creditworthiness and bank liquidation systems will depend on the identification of the tool that will absorb loss in non-default situations .
    We believe that the tools available for loss may include participative / speculative products, as there is limited liquidity risk and the reputation of the Bank .
    These instruments include restricted profit-sharing investment accounts (there is no confusion between the Bank's activity and the activities financed by these instruments) and profit-sharing accounts based on the balance sheet, provided that customers recognize that they are at risk of losing their capital;
    To receive appropriate compensation for that risk; and to contribute to the Bank's general asset portfolio. The instruments that Gulf banks have used to support their capital over the past three years (speculative instruments) are also potential tools to absorb losses .
    However, the desire of the market for these instruments when the most obvious characteristics of their absorption of losses has not yet been tested .
    Another key factor in the success of the creditworthiness and liquidation framework in the GCC is, in our view, better protection of primary debt in the event of liquidation .
    Customers bear the credit risk of the Corporation in Murabaha or Ijarah or any Islamic financial transaction that establishes a direct and direct link between the risks to the customers and the creditworthiness of the Bank .
    For these activities, the Bank may be subject to greater capital requirements or to the acquisition of the total capacity to absorb the loss (similar to the above instruments), which will be used to absorb the loss and protect the initial debt .
    There are two possible scenarios for classification
    S & P Global Credit Rating published the "Methodology and Assumptions of Classification of Banks: Additional Absorption of Losses" on 28 April 2015 to take into account changes in global regulations and potential special support through the effective application of bank liquidation systems that could benefit from it Initial debts in case of bank default .
    Under the additional capacity approach to absorb loss, we evaluate :
    · Based on legislative and regulatory characteristics, if additional capacity to absorb loss contributes to reducing the risk of default on the level of unsecured initial commitments of the Bank, thereby supporting the credit rating of the issuer .
    · Characteristics of instruments eligible to be included in additional capacity to absorb loss .
    · The quality and quantity of additional capacity to absorb loss as a proportion of risk-weighted assets that will support the bank's credit rating more than the credit rating without support .
    · Interaction between support based on additional capacity to absorb loss and other forms of positive and negative external interventions, including government support, group support, guarantees, short-term incremental support, and other external support .
    In general, when the country moves to implement an effective creditworthiness and liquidation system, we will review our assessment of the country's orientation to support its banking system and re-evaluate the impact on banks' credit quality .
    There are two possibilities at this stage :
    · Support points from additional capacity to absorb loss replace partial or full government support to reflect the additional protection provided by these instruments to primary debt .
    · If there are support points from additional capacity to absorb loss and government support, we will take the higher support points and consider our credit rating of the issuer .


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