Is­lamic fi­nance body ap­proves reg­u­la­tions for gold-based prod­ucts

The Sun (Malaysia) - - SUNBIZ -

BAHRAIN: The Bahrain-based Ac­count­ing and Au­dit­ing Or­gan­i­sa­tion for Is­lamic Fi­nan­cial In­sti­tu­tions (AAOIFI) said yes­ter­day it had ap­proved a syariah stan­dard for gold-based prod­ucts, a move aimed at ex­pand­ing the use of bul­lion in Is­lamic fi­nance.

Tra­di­tion­ally, gold has been treated as a cur­rency in Is­lamic fi­nance, which has con­fined its use to spot trans­ac­tions, but fresh guid­ance from AAOIFI is ex­pected to spawn a wave of prod­uct de­vel­op­ment in the in­dus­try.

AAOIFI ap­proved the fi­nal ver­sion of the stan­dard on gold and its trad­ing con­trols dur­ing a meet­ing of its syariah board held last week, the in­dus­try body said in a state­ment seen by Reuters.

This fol­lowed a year-long ef­fort that in­cluded pub­lic hear­ings held in Oman, Su­dan and Malaysia over the past few months, as well as a se­ries of meet­ings of a ded­i­cated AAOIFI sub­com­mit­tee.

The new stan­dard ad­dresses is­sues in­clud­ing col­lat­eral, set-off, screen­ing and the ex­change of gold in spot and de­ferred trans­ac­tions. Syariah-com­pli­ant prod­ucts backed by gold could in­clude ex­change traded funds and sav­ings ac­counts.

In a sign of mar­ket in­ter­est, the fi­nal stan­dard will be made avail­able on a com­pli­men­tary ba­sis by both AAOIFI and the World Gold Coun­cil, an in­dus­try body which sup­ported the de­vel­op­ment of the stan­dard.

Pro­po­nents hope the new guid­ance will help ad­dress muted con­sumer ap­petite for gold in the Mid­dle East re­gion, where de­mand has ac­tu­ally fallen in re­cent years.

AAOIFI also ap­proved a stan­dard on li­a­bil­ity of in­vest­ment man­agers, which ad­dresses is­sues in­clud­ing neg­li­gence and breach of con­tracts.

The stan­dard also de­tails li­a­bil­ity on the part of ser­vice agents in trans­ac­tions in­clud­ing Is­lamic bonds (sukuk) and in syn­di­cated fi­nanc­ing con­tracts and other prod­ucts.

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