At a lecture last Wednesday, Stephen Green, chairman of HSBC Holdings, said that the fundamental lesson to be learnt from the financial crisis is that ethics and values have to drive everything banks do.
With M. Umer Chapra, Research Adviser at the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IDB), Mr. Green discussed the growing role that Islamic finance has on the global financial markets.
Green’s speech focused on three issues – the role of financial markets, the shift of the world’s economic centre, and the ethics and sustainability of financial practices.
He noted that while emerging countries are rebounding faster than developed countries after the financial crisis, some important lessons can be learnt from it. “The last few years have seen the principles of market capitalism tested to their very limit. But ultimately the crisis has only served to reinforce the fact that there is simply no alternative to market based development.”
Green emphasized the Islamic market’s potential, estimating that Islamic assets under management could increase by 20 per cent a year. Islamic financial products are now available in 48 countries. London is the world’s third largest centre for Islamic finance.
But there are still challenges. The Islamic market lacks regulatory standardization and the depth of developed markets. Some Islamic countries are characterized by income inequality, limited access to financial services and an aging population. But he added that dismissing the developing world’s need for functional financial markets would be “absolutely the wrong lesson to take from the crisis.”
Banks can learn from Islamic finance about developing ethical products, according to Green. “Islamic banking weathered the worst of the financial crisis because its principles advocate avoiding excessive leverage, uncertainty and speculation, focusing instead on real projects and real assets.”
He stressed that banks should respond to customer demand for transparency, concluding: “In the aftermath of the financial crisis, it is trust, after all, that is the most precious of commodities in the financial services.”
Related posts:
- Australian Treasurer promotes crisis action
- Nobel Prize winner: “Sound recovery is pretty bleak”
- A new student market
- Clare Market Review: a history
- What next? Surviving the 21st century