Now let’s take a closer look at the Client’s perspective. Firstly, if the Bank is operating on purely equity based financing – return on deposits will be based on the Bank’s performance. Now how many of us here invest our life savings in the stock market? Because that is essentially a rather crude way of presenting an example of what a pure equity based financing system may bring. It is of course possible for the authorities to guarantee your deposit in the Islamic Bank a depositor choose to “invest” – but this would no longer be in the spirit of Musharaka and Mudharaba. But another point that needs to be considered is this. Are banks the best entity to provide equity-based financing. Would it be more suitable for a joint venture company, a partnership or a private equity funds to undertake this venture? Shouldn’t we develop these marketbased institutions to be the conduit for such an endeavour. Since market-based institutions do not have the fiduciary responsibility to depositors. Should we leave the banks which were created to play an intermediary role to continue to perform the function which they are good at. Wouldn’t the financial stability aspect be a consideration on whether banks are allowed to venture into equity-based financing? Shouldn’t we expand an entirely new Islamic finance industry that specialises in equity-based financing?
As of Monday, the per-counterparty maximum bid limit was raised from $ billion to $ billion, and an overall size limit of $ billion was imposed for each operation. If the total amount of bids received in an operation is less than or equal to the $ billion size limit, awards will be made at a fixed offering rate. However, if the total amount of bids received exceeds the overall operation size limit, the $ billion in ON RRPs will be allocated through a single-price auction using interest rates that counterparties now include with their bids. Awards are made at a “stopout rate” – the rate at which the overall size limit is achieved – with all bids below this rate awarded in full and all bids at this rate awarded on a pro rata basis. The stopout rate is determined by evaluating all bids in ascending order by submitted rate up to the point at which the total quantity of offers equals the overall size limit. 12 The Federal Reserve will be closely analyzing the results of the ON RRP exercise conducted under these new testing parameters in order to further its understanding of how an ON RRP facility might best be structured during the initial stages of the normalization process. In addition, the Federal Reserve Board has been testing a facility through which it offers term deposits to credentialed depository institutions. Term Deposit Facility (TDF) transactions could be used to temporarily reduce the quantity of reserve balances.