Islamic finance sets up liquidity management body

KUALA LUMPUR Oct 8 (Reuters) - A global Islamic liquidity management corporation has been set up to issue sharia-compliant instruments to help Islamic banks manage their risks and encourage more cross-border investments, an industry body said.

A lack of liquidity tools is seen as one of the key challenges to the emerging Islamic finance industry, with sharia banks handicapped partly due to the limited range of products they can invest in.

The newly set up body "would provide liquid short-term sharia-compliant instruments that would promote further the competitiveness and resilience of institutions offering Islamic financial services globally," the Islamic Financial Services Board said in a statement.

The board's members signed a memorandum of participation for the liquidity management corporation on the sidelines of the IMF-World Bank meetings in Washington, it said.

The Islamic Financial Services Board is a Kuala Lumpur-based body which sets standards on sharia governance, capital adequacy and risk management for the $1 trillion Islamic finance industry.

Its members include institutions such as the Asian Development Bank and the International Monetary Fund and banks, such as Kuwait Finance House (KFIN.KW) and Sharjah Islamic Bank SIB.AD.

(Click on [ID:nISLAMIC] for more Islamic finance stories and ISLAMIC for a speed guide) (Reporting by Liau Y-Sing; Editing by Tomasz Janowski)