The Bahrain Monetary Agency (BMA) and the London Metal Exchange (LME) have entered into a cooperation agreement, aimed at further advancing the fast-growing global Islamic banking industry.
A memorandum of understanding has been signed in London by HE Shaikh Ahmed bin Mohammed Al Khalifa, governor of the BMA, and Simon Heale, chief executive, LME.
Under the terms of the agreement the LME will assist the BMA to develop contracts and documents that could be used by Islamic financial institutions (IFIs) for conducting transactions in the metals also traded on the LME.
Standardisation of such contracts and documents would facilitate trading by IFIs, which manage assets in excess of US$230bn, of which about 80% are invested in commodities.
“The partnership between the BMA and LME will strengthen the global Islamic banking industry, enhance the ability of IFIs to trade in international markets and improve business volumes,” says Shaikh Ahmed.
The agreement comes as a result of a common recognition by the BMA and LME of the tremendous potential demand for products that conform to Islamic Shari”a principles.
Islamic banking and finance has, in a relatively short time, emerged as an important force in the international banking arena, with over 250 Islamic financial institutions operating in more than 50 countries.
The industry’s current annual growth rate of 15% is expected to continue in the foreseeable future.
“The agreement is also in line with BMA’s strategic policy to further consolidate Bahrain’s status as the world’s leading center for Islamic banking and finance,” adds Shaikh Ahmed.
As such, BMA has not limited itself to regulation and rigorous supervision of IFIs.
“We continue to respond to the industry’s operational needs by designing instruments and developing markets that are industry-specific,” says Shaikh Ahmed.
Simon Heale, chief executive of the LME says, “We are delighted to enter into this agreement with the Bahrain Monetary Agency. We want to work closely with the BMA and assist where we can. We are keen to co-operate to help ensure that transactions based around LME metals meet the standards required under shari”a law.”