Thus Hong Kong will adopt Basel II at the same time as other major international financial centres, such as London, Frankfurt and Tokyo. From a regional perspective, the implementation timetable in Hong Kong is broadly similar to that being adopted by Australia and Singapore. For several years now the HKMA has been developing its supervisory approach along Basel II lines, and this is leading to some significant changes in how supervision is conducted. Central to this is the issue of "process versus rules". Process versus rules The original Basel Capital Accord was developed when risk management was still very much in its infancy. It reflects what might be called a "rules-based" approach to regulation in the sense that it sets prescriptive standards that banks are required to follow. It relies largely on the application of simple, mechanical formulas for assessing how much capital a bank should hold. The essence of the old Capital Accord was that it represented an attempt to monitor the prudential soundness of banks by using a standardised risk measurement framework, which was applied to all institutions and which employed data based on a snap-shot of their balance sheets at certain specified reporting dates. The approach was standardised since regulators specify the precise form in which the calculation of capital adequacy is to be performed - for example, the specific risk categories into which assets are to be assigned.
The recent issuances of the world’s first green sukuk by two energy companies in Malaysia have kicked start the growth of green sukuk market and will significantly boost the “cleantech” movement. Fundamentally, Islamic finance is well positioned to advance the green agenda, as environmental protection and sustainable growth objectives are already embedded within its principles. The structures of sukuk make it well-suited to channel global Shariah-compliant capital to fund renewable energy and climate change projects. Socially responsible investment (SRI) sukuk has also made its debut with the unique vaccine sukuk programme launched in 2014 that raised funds worth USD500 million for children’s immunisation in a number of poor countries. These are proofs of new ways of mobilising resources to increase sustainable humanitarian financing to reach nontraditional donors and responsible investors. Innovation within the Islamic social finance space can also assist to address a number of issues facing the ummah and society at large. Waqf, sadaqah and zakat have large potential to become important additional sources of financing for people in need of aid. Each year, Muslims worldwide generously donate through these channels. The global volume of zakat itself, collected each year through formal mechanisms is estimated to be in the tens of billions of dollars. A conservative estimate by Islamic Development Bank indicated that there is at least USD600 billion of zakat collected are available to meet humanitarian needs.