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Recovery of GCC Islamic investment banks depends on improved risk management

Posted on 23 September 2010

A recovery of the tarnished Shari’ah-compliant investment banks (SCIB) would require that lessons from the crisis — such as the need to improve risk management be applied, says Moody’s Investors Service in its Special Comment on this troubled banking sub-sector. The global financial crisis had brought about a near-collapse of the SCIB model, with a handful of spectacular mid-crisis defaults of a few SCIBs further severely undermining the SCIB model.
“A potential rebirth of this sub-sector is likely to take a different form from the pre-crisis model,” says Anouar Hassoune, Vice President Senior Credit Officer in Moody’s Financial Institutions Group. “Specifically, Moody’s expects SCIBs to evolve away from being the preserve of boutique investment houses created by individual investment bankers. Instead, Moody’s believes that the SCIB concept could re-emerge in the form of specialised business lines of larger Islamic banking groups seeking to diversify.”………………………………………Full Press Release: Source

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