Non-interest banks to improve liquidity under Basel III Islamic finance – Expert
Expert in the banking and finance industry, has said that Non-interest banks in Nigeria, need more instruments to improve liquidity under the Basel III requirements of the global banking system.
Mr. Abdulwaheed Shitta, a banking and finance expert made this statement while speaking on “Opportunities and Challenges of Islamic Banking and Treasury Management in Nigeria”.
According to him, the Basel III Accord was initiated by the Basel Committee on banking supervision to address the global financial crisis of 2007-2008 to strengthen the banking sector across the globe and emphasized capital, liquidity management of banks, and other segments in the financial market.
He said “Liquidity is the ability of financial inflation to balance inflows and outflows for the institution to be liquid. Liquidity risk can occur when there is a mismatch between liabilities and assets. The committee also developed two minimum standards to ensure the liquidity of banks within the short-term and NSFR(Net stable funding ratio) to ensure liquidity at the medium to long-term”.
Global financial analysts have concluded that the impact of Basel III on Islamic banks is relatively smaller compared to the conventional financial institutions, considering the model of non-interest banking that does not support non-Shariah-compliant securities or derivative products.
He said in Nigeria, one common short-term money market instrument is the treasury bills which is not shariah-compliant. This is a reason for limited liquidity for non-interest banks under Basel III.