Islamic banking rules shield institutions from financial crisis - Moody's

Islamic financial institutions (IFIs) in the Gulf Cooperation Council countries have displayed strong resilience amid the current global financial debacle, says Moody's Investors Service in a new Special Comment on Thursday.

According to the rating agency, this is not only thanks to their strong growth and typically conservative approach, but also because the core principles of Islamic banking have protected them from elements of the crisis.

Global Islamic banking assets grew around 27 percent in 2007 and growth of 20-30 percent is expected this year as well.

"Although 2009 will likely be a tough year for Islamic banks, they benefit from a number of buffers: their credit portfolios have been essentially domestic, with limited pressure on asset quality so far, they have strong retail platforms, with high customer loyalty and deposit stability and their high capitalization and ample core liquidity often provide a relatively high amount of confidence to counterparts," says Anouar Hassoune, a Moody's vice president and senior credit officer as well as author of the report.

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