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Islamic finance ideal to curb ethical issues

PETALING JAYA: In a global financial system flawed by ethical issues, Islamic finance would be ideal as it espouses moral and equity sharing, an economic conference heard today.

Tan Sri Datuk Seri Panglima Andrew Sheng said there should a shift in the ethics mindset towards sharing the bad too.

Too much of ethics have been sacrificed at the altar of bonuses, he said.

“You cannot solve ethical problems (in the banking system) through laws,”he said, during a discussion on financial governance, during the Malaysian Economic Convention 2015 yesterday.

Sheng, who is Distinguished Fellow of Asia Global Institute, University of Hong Kong, and Chief Adviser to the China Banking Regulatory Commission, said the Asian region therefore needs to be cautious when benchmarking against the banking system in the west.

This is especially so when the Asian region would be the source of growth in financial needs in two to three decades.

What China, Japan, Korea and India is doing (in their policy shifts) is important as the existing model of the west is ageing and leveraged.

“If Basel III is designed to address the ` too big to fail’ banking system, why should it be us taking the medicine for the West which is suffering from malaria when we are suffering from dengue?”

Many Asian banks were among the first to meet the capital requirements of Basel III , a move which Sheng questioned saying it should not have been the case as the stringent requirements are designed to medicate the woes of the west.

“We need to be more street smart to play the game, but to the rest of Asia, think about it (complying with Basel III) carefully.”

While a big banking system is good, it is also fragile in a system that is biased towards debt than equity, he said.

Sheng, who also sits on the recently-appointed Special Economic Committee, said the debt bias sprang from the tax benefits and companies prefer to take loans from banks than look to the pricey initial price offering exercise to raise capital.

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