Thomson Reuters Announce Islamic Benchmark Rate
01 January, 2012
Thomson Reuters launched the world’s first Islamic finance benchmark rate at the World Islamic Banking Conference in Bahrain in late November. It is designed to provide an objective and dedicated indicator for the average expected return on Shari’ah-compliant short-term interbank funding using the contributed rates of 16 Islamic banks and the Islamic sections of conventional banks.
The benchmark’s ongoing implementation and integrity will be overseen by an Islamic Benchmark Committee of more than 20 Islamic finance institutions, chaired by Dr. Nasser Saidi, chief economist of the Dubai International Financial Center (DIFC), and a Shari’ah committee consisting of four eminent Shari’ah scholars.
Dr. Nasser Saidi, chair of the Islamic Benchmark Committee and chief economist, Dubai International Financial Centre, said: ‘The establishment of the IIBR (Islamic Interbank Benchmark Rate) marks an important milestone in the maturing of Islamic money markets by providing an international reference rate for interbank transactions. Conventional money markets have relied on LIBOR, which by definition does not comply with Shari’ah conventions. Islamic markets will be able to rely on the IIBR and it will become an international reference rate for both conventional and Shari’ah-compliant transactions. Our aim is to provide an IIBR that is reliable, timely, representative of market conditions, transparent in its construction and accepted as the market reference. Islamic money and financial markets are coming of age and becoming part of the mainstream.’
Established in co-operation with the Islamic Development Bank (IDB), the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the Bahrain Association of Banks (BAB), the Hawkamah Institute for Corporate Governance and a number of major Islamic banks, the IIBR harnesses Thomson Reuters global benchmark fixings infrastructure, which is used to compile over 100 fixings around the world.
Rates for Shari’ah-compliant US dollar (USD) funding will be contributed by the 16-member panel in the morning of each business day to Thomson Reuters systems and will be published daily on Thomson Reuters terminals and feeds at 11.00am Makkah time (GMT+3). The new benchmark can be used to price a number of Islamic instruments including common overnight to short-term treasury investment and financing instruments such as murabaha, wakala and mudaraba, retail financing instruments such as property and car finance and sukuk and other Shari’ah-compliant fixed income instruments. It can also be used for the pricing and benchmarking of corporate finance and investment assets.