DFSA slams complex Islamic structures

Author: | Published: 2 Nov 2011

Overly-complex Islamic finance structures such as the Nakheel sukuk leave open the potential for disruptive behavior, according to a Dubai Financial Services Authority (DFSA) regulator.

Complex Islamic finance structures which seek to replicate conventional products often require a large number of complex agreements, which in turn can lead to a large number of legal challenges down the line.

"All it does is give lawyers the opportunity to raise a new set of issues and to try it on on behalf of their clients," said Peter Casey, head of Islamic finance at the DFSA, speaking at an IBA session 'Islamic securities and structured products: new products or new paradigms?’ on October 31.

Casey cited the example of UAE property company Nakheel’s sukuk al ijara, which required 19 separate agreements and 17 pieces of legal documentation to cover...