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High Quality Liquid Sukūk: Relevance, Practice, and Empirical Research in the Context of Rising Global Interest Rates

Applied Economics and Finance

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Title High Quality Liquid Sukūk: Relevance, Practice, and Empirical Research in the Context of Rising Global Interest Rates
 
Creator Karatas, Abdullah
 
Description Liquidity management has always been a major issue in Islamic banking. In the early years of the industry, a major problem was a general tendency toward excess liquidity. In the future, the main issue in the context of depressed oil prices, a rising global interest-rate environment, and a tightened regulatory landscape under Basel III is likely to be a relative scarcity of high quality liquid assets (HQLA), or high quality liquid sukūk (Note 1). The incoming U.S. Treasury secretary Steven Mnuchin has already indicated that the Trump administration’s plans could rapidly turbocharge the U.S. economy, thereby altering the prevailing low-interest rate dynamic at the U.S. Federal Reserve (“U.S. Fed”), leading many to anticipate higher interest rates (Wigglesworth & Moore, 2016).Among the available liquidity management instruments in Islamic banking, only sukūk of a particular type meet the requirements of HQLA (in principle) as defined by the Basel Committee and adapted for Islamic finance by the IFSB (Islamic Financial Services Board). Candidates for HQLA are only international sukūk, i.e. sukūk that are issued in an international currency, listed, and traded not only locally but also internationally. Sovereigns and international institutions such as the IDB have issued almost all sukūk of this caliber. In this paper, we will make empirically informed qualitative projections on the outlook for HQL (high quality liquid) sukūk in the context of a rising global interest-rate environment.
 
Publisher Redfame Publishing
 
Contributor —
 
Date 2017-02-06
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://redfame.com/journal/index.php/aef/article/view/2046
10.11114/aef.v4i2.2046
 
Source Applied Economics and Finance; Vol 4, No 2 (2017); 141-154
2332-7308
2332-7294
 
Language eng
 
Relation http://redfame.com/journal/index.php/aef/article/view/2046/2307