Business
Yves Mersch
Islamic finance is a growing segment of the Grand Duchy’s financial centre. What enhancements does Luxembourg’s central banker see are needed?
Interview: Aaron Grunwald — Photo: Julien Becker/archives
“momentum is building” Yves Mersch has been governor of Luxembourg’s central bank since 1998, and a member of the European Central Bank’s governing board since 1999. A featured speaker at next month’s Islamic Financial Services Board Summit (see article on page 26), Mersch spoke with Delano about the development of Islamic finance in the Grand Duchy. AG: How important is Islamic finance in Luxembourg? YM: Islamic investment funds, Takaful [insurance] as well as Sukuk [bonds] are now part of the array of Luxembourg financial products. Based on the statistics of regulated products, Islamic finance currently still is a niche--however market momentum is building. AG: Why is Luxembourg attractive in the Islamic finance market? YM: There is notably its neutrality, which helps to mitigate the various national and cultural obstacles that has hindered in particular the international development of Islamic f inance so far. Certainly, proven political stability nowadays further enhances our attractiveness. AG: What work still needs to be done? YM: While disadvantages in terms of tax treatment have been removed for common Islamic finance transactions, further challenges remain such as the recognition of Islamic securities for refinancing purposes or the fulfillment of regulatory liquidity requirements. Best practice regulation and supervision necessitates careful differentiation among the various types of Islamic finance transactions.
YVES MERSCH: Islamic finance can be a funding source for Luxembourg organisations
AG: What about internationally? YM: The lack of standardised and internationally accepted Sharia-compliant money market instruments with good ratings, which could help foster cross border liquidity flows and would be likely to create a needed benchmark yield curve. This could enhance pricing transparency and clarity for customers. AG: What are the biggest misconceptions in Europe about Islamic finance? YM: Misconceptions about Islamic finance are fueled by prejudices regarding its underlying religious concepts, including the understanding of being available for Muslims only. Instead, Islamic finance is meant to be a profit generating business, accessible for everybody. Sharia-based
principles make it fundamentally different from conventional finance. Islamic finance is therefore neither replicating nor replacing conventional finance but should rather be seen as a complement. AG: Where would you like to see Islamic finance in Luxembourg in the coming years? YM: I would like to see Luxembourg capitalising on its core competences, such as the provision of infrastructure for Sharia-compliant securities transactions and servicing Sharia-compliant investment funds. Islamic finance could also serve as an attractive and diversifying funding source for public and private entities in Luxembourg.
30 - delano - April 2011
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30.03.2011 11:08:07 Uhr