Here is a story that illustrates that Shariah-compliant financial institutions are far from immune from risk, as much of the propaganda surrounding the industry claims.
It is certainly worth noting that two of the banks that were involved in the joint venture in question, Bank Saderat and Bank Melli, are two of the very largest Shariah-compliant banks in the world and are both currently sanctioned for activities involving terrorism and proliferation…
Bahrain’s central bank said on Thursday it had placed two Iran-linked companies, Future Bank and Iran Insurance Co, into administration to protect the rights of depositors and policyholders.
It said it wished “to reassure both the local and international financial community that this measure is an isolated incident and will not impact any other bank or insurance company in the kingdom.
Future Bank, based in Manama, is a commercial bank which was founded in 2004 as a joint venture between two Iranian banks – Bank Saderat and Bank Melli – and Bahrain’s Ahli United Bank.
Iran Insurance Co is the Bahrain branch of an Iranian government-owned insurer, according to its website, which said the parent company had a network of branches in Iranand paid-up capital of $236 million.
In the last three years, Iranian institutions have largely been frozen out of the global financial system by international sanctions imposed over Iran’s disputed nuclear programme. It was not immediately known whether the action against the two companies in Bahrain was related to the sanctions.
The Bahraini banking system has been hurt by the unrest and by low oil prices; bank lending to the private sector has been shrinking. In an effort to strengthen the banking industry, the central bank has been encouraging mergers and consolidation for several years.