The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
from Felix Salmon:
The UK's Institutional Investor Council has issued a blistering report on the excessive fees that investment banks charge companies to issue new shares -- fees which one issuer are "usually immoral". It certainly seems that way, looking at this chart: fees have been steadily increasing over time, even as the discount at which the new shares are issued has got larger and larger. The bigger the discount, of course, the less risk taken on by the underwriter, since the more that the share price would have to plunge overnight in order for the underwriter to risk losing money on the deal.
From Australia to South Africa, governments are scrambling to change the law to accommodate the $1 trillion Islamic finance industry, whose avoidance of toxic debt has looked increasingly attractive since the global crisis. But in the Gulf Arab region, birthplace of Islam and cradle of Islamic finance, governments have taken a more passive approach, which experts say is slowing the industry’s growth.
It’s a myth to assume Islamic finance products are safer than conventional products and underlying risks should be studied more carefully, Qatar’s top regulator said at the Davos World Economic Forum meeting on Wednesday. Despite being billed as a safer alternative to traditional banking because assets must underpin deals, Islamic bondholders have found they may not have any more legal safeguards than conventional counterparts in the event of default.
Malaysia hopes that Muslim countries can agree on which goods and products are halal, or acceptable to Muslims, a move that would boost the $2 trillion industry, although politics and interpretation of islamic law may complicate the task.
(Photo: Halal label at Kuala Lumpur restaurant, 8 April 2005/Bazuki Muhammad)
The Organisation of the Islamic Conference (OIC) is working on a single standard to be applied in its 57 member countries. Agreement to regulate the halal industry, which ranges from financial institutions to cosmetics and meat, would help trade and speed up the certification for makers of halal products.“Malaysia’s halal certification is recognised worldwide so perhaps we can play an important role in creating a global standard,” Malaysia’s religious affairs minister Jamil Khir Baharom said in an interview on Thursday. “We need a halal certification that everyone can use easily.”Muslim jurists do not always agree on what is halal. Islam prohibits the consumption of pork and prescribes how animals must be slaughtered, but there has been debate on the acceptability of non-alcoholic beer, collagen and vinegar.See the full story here.