The summit with the theme, 'Global Financial Architecture: Challenges for Islamic Finance,' attracted participants from many countries including for the first time banking regulators from Luxembourg, Sweden and Mauritius. The showcase speakers included,Claude Zimmer, a member of the council at Banque Central du Luxembourg; Fernand Grulms, CEO of Luxembourg for Finance (LFF), the promotion arm of the Luxembourg financial services industry, whose chairman is Yves Mersch, governor of the central bank; Camille Thommes, director general of the association of the Luxembourg Fund Industry (ALFI); and Marc Theisen, senior partner at Theisen Law.
The general consensus was that there is significant potential for Islamic finance out of Luxembourg and for the Duchy to become a major Islamic finance hub, especially for cross-border transactions, including in Europe using the EU passport, because this initiative has strong political support especially from Luxembourg's Minister of Finance Luc Frieden and Governor Yves Mersch.
Zimmer stressed that the Luxembourg delegation was in Bahrain to inform delegates about the latest developments regarding Islamic finance in the Duchy and to learn from others' experiences. He said that there should be no regulatory or legal impediments for an Islamic bank to be authorised in Luxembourg as long as it meets the provisions of banking law. Because the Duchy has a mere population of half a million, it would not make sense for a commercial bank to be established. However, an Islamic investment bank could be feasible.
Zimmer, however, agreed that the main challenge for the Islamic finance sector in many jurisdictions is liquidity management, because there are no Shariah-compliant government treasury instruments in which Islamic banks can park their reserves requirements and short-term liquidity requirements. Governor Mersch was very positive about Islamic finance and the potential role it can play toward contributing to global financial stability.
The Luxembourg tax authority in January 2010 introduced measures facilitating sukuk and Islamic finance products in the country. Guy Heintz, director of Contributions (tax administration) of Luxembourg, stressed that neutrality and equality is the basis for all financial products including Shariah-compliant ones. He said, "Shariah-compliant products such as Murabaha and Sukuk are no longer considered to be at a disadvantage when compared with conventional banking products and systems found in Luxembourg."
Luxembourg is also involved with the IFSB and the Islamic Development Bank taskforce on developing a liquidity management scheme for global Islamic finance. GUINEA: Islamic funds invested in the Gulf Cooperation Council (GCC) sharply improved their position in Lipper rankings, according to a recent report. These funds were "performing at the same pace as those invested in Asian emerging markets, thanks to the positive returns witnessed in the seven GCC stock markets during first quarter 2010," Lipper analyst Dunny P Moonesawmy said in the report.