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Message by the Secretary-General

The IFSB is pleased to present the new format of our newsletter, The IFSB Bulletin, will henceforth only be available in digital format via our online platforms. This is in line with the strategic intent of the IFSB to increasing value to our members, as well as enhancing our global visibility.

This latest edition of the Bulletin highlights the activities of the IFSB from December 2019 to June 2020. During this period, the world has been faced with an abrupt COVID-19 pandemic. While the impact and duration of the pandemic remains unclear, its implication has been pervasive including for the Islamic Financial Services Industry (IFSI).

The IFSB, in addition to issuing guiding statements is also taking note of various regulatory and supervisory measures as well as international and national policy initiatives to support economic activities and maintain financial stability globally, especially in its various member jurisdictions. We invite you to visit the IFSB website to find out more on the IFSB related statements and activities with regard to the COVID-19 pandemic.

As part of measures to flatten the curve of the spread of COVID-19, movement restriction orders have been issued in many countries including Malaysia, where the IFSB Secretariat is located. Beginning 18 March 2020, the IFSB has started operating and adjusting to the “work from home” culture, a continuity plan in ensuring that its operation is running smoothly and efficiently. As Malaysia is now in the Recovery Movement Control Order (RMCO) phase, we are now back working from the office. Please refer to our website regarding our operational hours.

 

Notwithstanding the lockdown, we are pleased to announce the launch of the IFSB social media platforms in the first half of 2020, namely, Twitter, Facebook and our YouTube channel. In addition to the increased followership of the IFSB on LinkedIn, we also look forward to receiving your support via visiting our other social media platforms. Please see below the @handles/channel/page you could follow and help us to increase the likes in any of our posts available on the platforms.

The IFSB has also reconsidered and realigned key strategic targets and work plans for 2020 in order to ensure that the deliverables are achieved. Our emphases have now shifted toward electronic/digital platforms viable to our various member organisations and other stakeholders.

We therefore, look forward to receiving your support via visiting our social media platforms to be aware about; and also participate in our various online events and workshops that we have lined up for the second half of 2020.

Thank you.

Dr. Bello Lawal Danbatta


36th Council Meeting of the Islamic Financial Services Board

The 36th Council Meeting of the IFSB and the 18th General Assembly were for the first time held virtually via online platform on 4 June 2020. The Meetings were chaired and hosted by Bank Negara Malaysia. The IFSB was represented by its Secretary-General, Dr. Bello Lawal Danbatta.

H.E. Nor Shamsiah Mohd Yunus
Governor, Bank Negara Malaysia and Chairperson of the IFSB Council
 
H.E. AbdulHamid M. Saeed Alahmadi
Governor, Central Bank of United Arab Emirates and Deputy Chairperson of the IFSB Council
 
H.E. Dr. Perry Warjiyo
Governor, Bank Indonesia and Chairman of the IFSB Executive Committee

Among the Governors who are also Council Members attending the 36th Council Meeting were:

H.E. Rokiah Badar
Managing Director
Autoriti Monetari Brunei Darussalam
 
H.E. Godwin Emefiele
Governor
Central Bank of Nigeria
 
H.E. Tahir Salim Al Amri
Executive President
Central Bank of Oman
H.E. Reza Baqir
Governor
State Bank of Pakistan
 
H.E. Sheikh Abdulla Bin Saoud Al-Thani
Governor
Qatar Central Bank
 
H.E. Mohamed Alfatih Zain Alabdeen
Governor
Central Bank of Sudan

Also in attendance were (Council and Full Members Representatives):

  1. H.E. Dr. Mansur Muhtar,Vice President, Country Programme, Islamic Development Bank
  2. H.E. Ahmed Jamal, Deputy Governor, Bangladesh Bank
  3. H.E. Dr. Maher Sheikh Hasan, Deputy Governor, Central Bank of Jordan
  4. H.E. Dr. Fahad Abdullah Aldossari, Deputy Governor, Saudi Arabian Monetary Authority
  5. H.E. Erhan Cetinkaya, Vice President, Banking Regulation and Supervision Agency of Turkey
  6. H.E. Hemiata Sadhna Sewraj – Gopal, Second Deputy Governor, Bank of Mauritius
  7. Chia Der Jiun, Deputy Managing Director, Corporate Development, Monetary Authority of Singapore
  8. Khalid Hamad Alhamad, Executive Director, Banking Supervision, Central Bank of Bahrain
  9. Fathi Agob, Governor’s Advisor for Islamic Banking, Central Bank of Libya
  10. Waleed Alawadhi, Executive Manager of Supervision Sector, Central Bank of Kuwait
  11. Badr Nabil, Deputy Director, Banking Supervision Directorate, Bank Al - Maghrib
  • Imansyah, Deputy Commissioner, International and Research, Indonesia Financial Services Authority
  • Dr. Jafar Jamali, Deputy Legal Affairs & Board Member, Securities and Exchange Organization of Iran
  • Mukhtar Bubeyev, Acting Chief Executive Officer, Astana International Financial Centre Authority
  • Noraizat Shik Ahmad, General Manager, ICM Product Development, Securities Commission Malaysia
  • O.S Thomas, Commissioner, National Insurance Commission of Nigeria
  • Umar Ibrahim, Managing Director, Nigerian Deposit Insurance Cooperation
  • Youssef Hamad Al Blihid, Vice Chairman of the Board, Capital Market Authority, Saudi Arabia
  • Dr. Ali Cufadar, Executive Director, Banking and Financial Institutions Department, Central Bank of the Republic of Turkey


Front L to R: Dr Bello Lawal Danbatta, H.E. Dr Zamir Iqbal, H.E. Dr Sugeng, H.E. Aishah Ndanusa Ahmed, H.E. Sheikh Abdul Rasheed bin Abdul Ghaffour, H.E. Rokiah Badar, H.E. Fazle Kabir, H.E. Saddek El Kaber, H.E. Dr Qais bin Issa Al Yahya, H.E. Dr Fahad Abdullah Aldossari, H.E. Prof. Badreldin Abdelrahim Ibrahim, H.E. Dr Yakup Asarkaya

Back L to R: Bambang W. Budiawan, Dr Jafar Jamali, Hanadi Khaled Ahmed, Waleed Al-Awadhi, Dr Mohammed Zougari-Laghrari, Hisham Saleh Al-Mannai, Khalid AlKharji, Noraizat Shik Ahmad, Oguz Aslaner


COVID-19: IFSB Statements & Activities

The IFSB has created a special section on its website with regard to the issue of COVID-19 pandemic. We closely monitor the current regional and global situation, issue statements, make announcements, organise discussion forum and executive programmes, and also engage in research activities with emphasis on how the pandemic impacts the Islamic financial services industry. For more information, please visit our website, www.ifsb.org.


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About Us

The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry-related issues, as well as organises roundtables, seminars and conferences for regulators and industry stakeholders. Towards this end, the IFSB works closely with relevant international, regional and national organisations, research/educational institutions and market players.

Event Highlights/Workshops


The IFSB organised Public Hearings via webinar for Exposure Drafts 23, 24 and 25



The IFSB Secretariat held public consultation for the Exposure Draft (ED) on the Revised Capital Adequacy Standard (RCAS) for Institutions Offering Islamic Financial Services (Banking Segment) from 4 November 2019 until 2 January 2020. During this period, a Public Hearing webinar on the ED-23 was also successfully organised on 17 December 2019. This Public Hearing webinar was one of the pioneering e-platform approaches which the IFSB had efficaciously implemented as part of the due process in the formulation of the IFSB Standards and Guidelines.

The IFSB's RCAS aims to provide an updated framework for regulatory capital components for IIFS that comply with Sharīʻah rules and principles as well as the latest BCBS criteria. The standard will revise and supersede IFSB-15 and provide standardised approaches for identifying and measuring risks in Sharīʻah-compliant products and services and in assigning risk weights thereto. The standard will also enhance the capital adequacy treatment for IIFS in the securitization and ṣukūk issuance process in line with the current global regulatory standards and developments in the IFSI.

Similarly, the Secretariat also held Public Consultation and Public Hearing for the following ED:

  1. Guiding Principles on Investor Protection in Islamic Capital Markets (IPICM) (ED-24)
  2. Disclosures to Promote Transparency and Market Discipline for Takaful/Retakaful Undertakings (TMD) (ED-25)

The Public Consultation period for both EDs were held from 24 March 2020 until 24 May 2020. During this period and in line with its Standards development process, the IFSB successfully organised two Public Hearing webinars each for ED-24 and ED-25 on 20 April 2020 and 6 May 2020 respectively.

The IFSB's IPICM standard aims to identify Islamic finance-specific issues that need to be considered within capital market regulatory frameworks for investor protection. It intends to define best practices for investor protection in relation to the specific types of Sharīʿah-compliant capital market instruments and practices and to increase harmonisation of regulatory practice.

The IFSB's TMD takāful/retakāful standard aims to facilitate access to relevant, reliable and timely information by takāful market actors generally, and by takāful participants in particular, thereby enhancing their capacity to monitor and assess the performance of takāful undertakings.


Moody’s Delivers a Presentation at the 20th Islamic Financial Stability Forum

In conjunction with the 35th Islamic Financial Services Board (IFSB) Council Meeting and Side Events which was held on 11 December 2019, the 20th Islamic Financial Stability Forum was held on 10 December 2019, hosted by the Bangladesh Bank. The topic presented was "Challenges & Opportunities in Global Islamic Finance Industry Stability” by Mr. Henry MacNevin, Associate Managing Director, Banking EMEA, Moody's Investors Service Limited and Mr. Nitish Bhojnagarwala, Vice President – Senior Credit Officer, Moody's Financial Institutions Group.

The presentation focused on key themes that will shape global credit in 2020 as well as insights into the growth and sustainability of Islamic finance in core markets. In addition to highlighting prospects of Islamic finance in some frontier markets, the presentation also touched on the key challenges for the sustainable development of the global Islamic finance industry.


Facilitating the Implementation of Standards (FIS) E-Workshops

The IFSB organised FIS E-Workshop on on Financial Inclusion and Islamic Finance based on the IFSB’s recent Standard, Technical Note 3 (TN-3) on 21 April 2020 in Kuala Lumpur. This is part of the IFSB’s FIS E-Workshop series, aimed at creating flexibility and enhancing the participants' understanding of the IFSB standards and guiding principles, thereby improving their capabilities to implementing these Standards in their respective jurisdictions. It is also part of the IFSB’s initiative in providing the IFSB members with accessibility to the IFSB services and activities during the current COVID-19 pandemic. The session provided guidance on good practices in regulating the financial sector to enhance financial inclusion through Islamic finance, while considering proportionality in balancing the benefits of regulation and supervision against the operational risks and costs. The session also covered recent developments in enhancing financial inclusion through digital finance and financial technology (FinTech), and explored practical modalities for the integration of social finance models in Islamic finance.

This second online workshop series was held on 18 June 2020 discussing the topic of IFSB-3 on Corporate Governance, one of the crucial aspects for institutions offering Islamic financial services (IIFS). Among discussions during the session were; issues of Corporate Governance specific to IIFS; the General Governance Approach from IFSB-3 standards perspective; how IIFS shall acknowledge rights of Investment Account Holders and clarification of how compliance with Sharīʻah rules and principles is an integral part of Corporate Governance for IIFS.



Meetings Updates


IFSB Annual Meetings 2020

The 36th Meeting of the Council and the 18th General Assembly were successfully organised on 4 June 2020 via online platform. The virtual meetings were attended by Central Bank Governors, Executive Presidents, Chairmen, Managing Directors, Vice Presidents and Deputy Governors of regulatory and supervisory authorities, senior representatives from among the Council, Full, Associate and Observer members of the IFSB.


The IFSB Admits Five Organisations into Its Membership during its First-ever Online IFSB Annual Meetings 2020

The Council of the Islamic Financial Services Board (IFSB) approved the admission of five organisations into the IFSB membership. These included two supervisory authorities as Full and Associate Members and three market players as Observer Members.

The newly admitted members are:

Full Member

  1. The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market, Kazakhstan

Associate Member

  1. The Securities and Exchange Commission, Nigeria

Observer Members

  1. Capital Shield Insurance Brokers L.L.C, United Arab Emirates
  2. PT Bank Syariah Mandiri, Indonesia
  3. Fitch Ratings Singapore Pte Ltd, Singapore

The full list of the IFSB members is available on the IFSB website: www.ifsb.org. The roles and responsibilities of the members (by category) are detailed in the IFSB Articles of Agreement that can be downloaded from the IFSB website.


1st Extraordinary Meeting of the Technical Committee of the IFSB

An Extraordinary Meeting of the Technical Committee of the IFSB was held via web conferencing (webinar) on 21 May 2020. The meeting discussed the potential implications of COVID-19 on the Islamic financial services industry, and draft public statements to guide regulators and market players in navigating the economic and policy challenges. The TC also deliberated on a suitable due process for issuance of such statements to ensure appropriate governance and continuous compliance to Sharīʻah rules and principles.


3rd Meeting of the Executive Committee

The 3rd Meeting of the Executive Committee of the IFSB was organised via webinar on 29 April 2020, hosted by the IFSB Secretariat in Kuala Lumpur. The Executive Committee is responsible for advising the Council on operational and administrative matters relating to the IFSB (as determined by the Council). It consists of at least five members of the IFSB Council including the Chairman of the Committee selected by the Council and shall have a term of office of two years.


50th Meeting of the Technical Committee of the IFSB

The 50th Meeting of the Technical Committee of the IFSB was held via web conferencing on 18 March 2020 hosted by the IFSB Secretariat in Kuala Lumpur, Malaysia. The meeting discussed the developments that have taken place in the IFSB, in line with the implementation of the IFSB Strategic Performance Plan (SPP) 2016-2018 which ended in 2018. The meeting also deliberated on the new SPP 2019-2021 and Annual Strategic Work Plan (SWP) for 2020 as approved by the IFSB Council.


35th Islamic Financial Services Board (IFSB) Council Meeting and Side Events
Bank Negara Malaysia Helming the IFSB Chairmanship for 2020

The 35th meeting of the IFSB Council, hosted by Bangladesh Bank, was held on 11 December 2019 in Dhaka, Bangladesh. The Council Meeting was chaired by H.E. Fazle Kabir, the Governor of Bangladesh Bank and Chairman of the IFSB Council for 2019, and attended by central bank Governors, Deputy Governors of regulatory and supervisory authorities, and senior representatives from among the Council and Full members of the IFSB.

At the meeting, the IFSB Council appointed H.E. Nor Shamsiah Mohd Yunus, Governor of Bank Negara Malaysia as the Chairperson, and H.E. Abdulhamid Saeed, Governor of Central Bank of the United Arab Emirates as the Deputy Chairperson of the IFSB Council for 2020.


Five Organisations Admitted into the IFSB Membership during 35th Council Meeting

The IFSB Council approved the admission of five organisations into the IFSB membership during its 35th Meeting held on 11 December 2019 in Dhaka, Bangladesh. The newly admitted members were:

  1. United Nations Development Programme - UNDP
  2. Dubai Islamic Economy Development Centre – DIEDC, United Arab Emirates
  3. Jaiz Bank Plc, Nigeria
  4. PT Bank BNI Syariah, Indonesia
  5. Sarmad Insurance, Iran

Two New Standards for the Islamic Financial Services Industry Approved in the 35th IFSB Council Meeting

The two new standards are:

  • TN-3: Technical Note on Financial Inclusion and Islamic Finance; and
  • GN-7: Guidance Note on Sharī`ah-compliant Lender-of-Last-Resort Facilities

TN-3 provides guidance on good practices in regulating the financial sector to enhance financial inclusion through Islamic finance, while considering proportionality in balancing the benefits of regulation and supervision against the risks and costs. The TN also covers recent developments in enhancing financial inclusion through digital finance and financial technology (FinTech), and explores practical modalities for the integration of social finance models in Islamic finance.

GN-7 aims to serve as a benchmark for central banks in establishing and operationalising an SLOLR framework that applies to full-fledged Islamic commercial banks and Islamic subsidiaries of conventional banks. It is intended to be an operational document to assist RSAs in devising and implementing SLOLR arrangements.

The softcopies of TN-3 and GN-7 are available on the IFSB website, www.ifsb.org.

Technical Updates

Note: The briefs for below are the continuation from the updates available on the 18th issue of the IFSB Bulletin.


Technical Note on Recovery and Resolution of IIFS

The Task Force (TF) has so far held five working group meetings, discussing issues paper, initial study report, report of a survey questionnaire, the PED and the RPED. The fifth meeting of the working group, held in June 2020, also discussed any possible implications of COVID-19 on recovery and resolution of IIFS. The RPED is now being refined based on the TF's comments from the 5th meeting. The document will be tabled to the Technical Committee in July/August 2020 for approval to be submitted to the Sharīʻah board for its first review.


Revised Sharīʻah Governance Framework Standard

The Joint IFSB-AAOIFI working group has so far held three working group meetings, discussing issues paper, initial study report, and report of survey questionnaires conducted in 2020. The surveys were targeted at regulatory and supervisory authorities, as well as institutions offering Islamic financial services of all three Islamic finance sectors. The fourth meeting of the working group is planned to discuss the PED, which is currently being prepared and is informed by the survey results and resolutions of the working group from the third and earlier meetings.


Core Principles for Islamic Finance Regulation (Takaful)

The working group has so far held four working group meetings, discussing issues paper, initial study report, report of a survey questionnaire and a Preliminary Exposure Draft (PED). The RPED is currently being prepared with a view of addressing the working group's comments from the 4th meeting. The RPED will be presented for the Working Group's deliberations in its 5th meeting in July 2020. The document will subsequently be tabled to the Technical Committee for approval to be submitted to the Sharīʻah board for its first review.


Disclosure to Promote Transparency and Market Discipline for Takaful / Retakaful Undertakings

Following its first Sharīʻah review in early 2020, the Revised Preliminary Exposure Draft (RPED) of the Standard was presented to the WG at its 6th Meeting on 4th March, for finalisation of the draft for its issuance as an exposure draft (ED) for public consultation. Known as ED-25, the public consultation period took place from 25 March 2020 to 25 May 2020. Two Public Hearing sessions were conducted via online platform on 20 April 2020 and 6 May 2020. The Working Group met for a 7th time on 29 June 2020 to finalise the draft based on the public consultation comments. The working group also discussed the impact of COVID-19 on disclosure requirements for takafu/retakaful undertakings. The final draft, informed by the working group's comments, will undergo a second Sharīʻah review in September 2020 before seeking approval from the IFSB Technical Committee and Council in November and December 2020 respectively for issuance of the standard.


Investor Protection in Islamic Capital Markets (IPICM)

Following its first Sharīʻah review in 2019, the RPED of the IPICM draft was presented to the working group at its 5th Meeting for finalisation of the draft for its issuance as an exposure draft (ED) for public consultation. Known as ED-24, the public consultation period took place from 24 March 2020 to 24 May 2020. Two Public Hearing sessions were conducted via online platform on 20 April 2020 and 6 May 2020. The Working Group met for a 6th time on 24 June 2020 to finalise the draft based on the public consultation comments. The working group also discussed the potential implications of COVID-19 on investor protection. The final draft will undergo a second Sharīʻah review in September 2020 before seeking approval from the IFSB Technical Committee and Council in November and December 2020 respectively for issuance of the standard.


Revised Capital Adequacy Standard for Institutions Offering Islamic Banking Services (RCAS)

The working group for the revised capital adequacy standard conducted its 6th meeting in Kuala Lumpur, Malaysia on 21 January 2020. The meeting discussed the comments from the public consultation process, which had ended on 02 January 2020. Subsequently, the updated exposure draft was submitted to the Sharīʻah Board for review. The Sharīʻah Board met twice – the first was a two weeks meeting in Madinah, Saudi Arabia between 5 and 19 February 2020, and the second was held virtually between 30 May and 3 June 2020. The Sharīʻah board plans to meet for a third time to finalise its review of the revised capital adequacy standard in July 2020.


Core Principles for Islamic Finance Regulation [Financial Market Infrastructures]

The IFSB Council in its 35th meeting held on 11 December 2019 in Dhaka, Bangladesh approved the commencement of the new IFSB standard on Core Principles for Islamic Finance Regulation (Financial Market Infrastructures) (CPIFRFMI). Subsequently the first working group meeting took place on 17 March 2020 where the Initial Study Report together with draft survey questionnaire were presented for deliberation, and was followed with Survey exercise in April 2020. The working group had its second meeting in June 2020 where the survey report, potential implications of COVID-19 to CPFRFMI, and draft outline of the PED were presented. The 3rd working group meeting is planned in Q4 2020 to discuss the PED.


IADI-IFSB Core Principles for Effective Islamic Deposit Insurance Systems (CPIDIS)

The Council of the IFSB, in its 35th meeting in December 2019, gave conditional approval to issue the CPIDIS standard, subject to the approval of the International Association of Deposit Insurers. Several comments were subsequently raised by members of IADI and both IFSB and IADI Secretariats, with the support of the Sharīʻah Board, continue to work together to ensure the final document is not in conflict with existing IADI and IFSB guidelines, and is in compliance with Sharīʻah rules and principles.


Prudential and Structural Islamic Financial Indicators (PSIFIs) Updates

13th Meeting of the Task Force on Prudential and Structural Islamic Financial Indicators (PSIFIs) on 22 April 2020.

Research Working Papers


As part of its Strategic Work Plan (SWP) for 2020, the IFSB will be publishing the following five working papers in 2020:

Effectiveness of macroprudential policy for financial stability in the Islamic banking industry

This is a joint working paper between the IFSB, Saudi Arabia Monetary Authority (SAMA), and Bank Indonesia. The paper investigates various macroprudential tools and extent of their use and effectiveness to cater for specific stability issues in the Islamic banking industry in IFSB member jurisdictions. It is envisaged that the working paper will provide insight into the set of macro-prudential analytical tools needed to construct a macro-prudential policy database. Specifically, the catalogue of macro-prudential measures employed by central banks and other supervisory authorities to mitigate systemic risks with respect to Islamic banks can be included in the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) database. Moreover, while macro-prudential policy is still an evolving field, understanding how macro-prudential policy tools is implemented in Islamic banks is crucial for proper implementation of the policy measures, and could help generate further insights into the effectiveness of such measures in mitigating systemic risk.

Risk Based Supervision in Islamic banking

This is a joint paper between the IFSB and SAMA. It focuses on risk-based supervision practices in IFSB member jurisdictions with specific attention to how peculiar risks due to the nature and practice of Islamic banking are catered for in the respective IFSB jurisdictions. Specifically, the paper examines the scope of supervisory regimes regarding RBS framework, and the adequacy of the existing framework with respect to the implementation of RBS to Islamic banks. Moreover, it provides an overview of the experiences of supervisors, as well as identify the challenges toward implementing RBS to Islamic banks and measures on the way forward.

Regulatory and Supervisory Issues Arising from Takaful Windows

The third working paper focuses on regulatory and supervisory issues in Takaful windows operations. Specifically, the paper emphasises on the ‘generic’ issues relating to different arrangements of approach of entry into the takāful market (i.e. takāful/retakāful window, including a branch or a subsidiary of conventional insurer). The paper highlights potential issues and challenges that may arise in the supervision of takāful and retakāful window operations, including issues concerning the supervision of cross-border activities of takāful and retakāful branch or a subsidiary of foreign (re)insurance entities.

Assessing the financial stability of the Islamic banking industry considering the COVID-19 pandemic

The fourth working paper focuses on the implication of COVID-19 pandemic for the resilience and stability of the Islamic banking industry. For the Islamic banks, the IFSB IFSI Stability Report 2020 projects a sense of optimism of resilience and stability based on the 2019 financial year data. However, the abruptness of the COVID-19 pandemic and its direct impact on small businesses and households will test such projected resilience. Moreover, in the event of significant losses due to the pandemic, Islamic banks may be faced with equity capital erosion. The paper will on the basis of extent of data availability assess the impact of the pandemic on Islamic banking specific resilience indicators like the asset composition and quality, profitability, funding, liquidity, leverage, and capital adequacy of Islamic banks in IFSB member jurisdictions.

Financial stability implication of operational and regulatory digital transformation in Islamic banking

The fifth paper focuses on regulatory and operational considerations for financial stability implications of digital transformation in Islamic banking. Islamic banks today face challenges arising from both market structure dynamics and transformation to digital banking. The introduction of new technologies and business models in the Islamic banking industry will no doubt enhance operational efficiency. simplification of banking processes and customer satisfaction with positive implication for economic bottom line alongside new opportunities for growth. However, these developments are also likely to produce associated new risks that require careful consideration by regulators with respect to ensuring financial stability and investor protection. Such risks include those arising from cloud concentration, cyber security, Shari’ah non-compliance, cryptocurrency, AML/CFT risks etc. The paper provides insights into how regulators and supervisors currently treat such technology exposures as part of their domestic prudential rules, and what are the peculiar impediments or challenges if any to the digital transformation of Islamic banking.

All the working papers once issued will be available on the IFSB website, www.ifsb.org.

International Collaborations


The IFSB Receives Technical Assistance (TA) Grant from the Islamic Development Bank to Translate 10 IFSB Standards into the Russian Language

 

Dr. Bello Lawal Danbatta, Secretary-General of the IFSB and H.E. Dr. Zamir Iqbal, Vice President, Finance (Chief Financial Officer) of the Islamic Development Bank exchanging the Technical Assistance (TA) Agreement. The TA funds will support the translation of 10 IFSB standards covering the Islamic banking, Islamic capital market and Islamic insurance (takāful) sectors into the Russian language as part of the IFSB Strategic Performance Plan, with the aim of raising awareness and supporting the expansion of Islamic finance in countries where Russian language is widely used. The TA from the IsDB to the IFSB is planned to be implemented over a period of three years starting 2019 to 2021.

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The Financial Stability Board (FSB) Approves to Include the IFSB's Core Principles for Islamic Finance Regulation (Banking Segment) into the Compendium of Standards

The IFSB is pleased to announce that its IFSB-17: Core Principles for Islamic Finance Regulation (Banking Segment) standard will be included in the Financial Stability Board (FSB) Compendium of Standards, approved by the Standing Committee on Standards Implementation (SCSI) of the FSB in the annual process of updating the Compendium. With this milestone, the work of the IFSB in terms of prudential regulation and standard setting is now recognised to be on par with works of other outstanding international Standard setting bodies. In 2018, the International Monetary Fund (IMF) Executive Board approved the endorsement of the IFSB-17 "Core Principles for Islamic Finance Regulation" (CPIFR) for banking sector and their assessment methodology for the purposes of undertaking financial sector assessments and preparing Reports on the Observance of Standards and Codes (ROSCs), for both fully Islamic banking systems as well as systemically significant Islamic banking systems in dual banking markets.

  The IFSB and AMF Renew MoU to Support the Development of the Islamic Finance among Member Countries

The IFSB and the Arab Monetary Fund (AMF) sealed the continuation of collaboration between the two institutions with a new Memorandum of Understanding (MoU) for the period of three years. The continuation of collaboration signifies the commitment of both institutions in increasing awareness and promoting sound practices of Islamic finance based on its tremendous potential for the advancement of financial services industry. The IFSB, represented by Dr. Bello Lawal Danbatta, Secretary-General and the Arab Monetary Fund, represented by H.E. Dr. Abdulrahman A. Al Hamidy, Director General/Chairman of the Board signed the MoU on 23 April 2020 to continue the cooperation and collaboration in promoting programmes and initiatives for the Islamic financial services industry, specifically in the Arab region. The first MoU which covered the period of 2016-2019, had successfully initialised the collaboration between the IFSB and the AMF in synergising the development of Islamic finance in common member countries. This MoU is in line with the IFSB’s mandate to promote the stability and resilience of the Islamic financial services industry.

Recent Publications


  IFSB 11TH PUBLIC LECTURE ON FINANCIAL POLICY AND STABILITY
Issuance date: December 2019

The eleventh series of the Lecture was held in May 2019, in Kuala Lumpur, Malaysia. The two Lecture papers are from:

Fintech, Regtech and Suptech and Their Implications for Regulation and Supervision
Lecture by: Fahad Yateem
Director, Islamic Financial Institutions Supervision
Central Bank of Bahrain

Balancing Sharī‘ah Compliance and Technology-Driven Growth: A Banking Perspective
Lecture by: Ashraf Gomma Ali
Regional Head, Sharia Advisory and Governance
CIMB Islamic Bank, Malaysia

The publication is available for download here.

  21ST ISLAMIC FINANCIAL STABILITY FORUM
Issuance date: December 2019

This 21st edition of the IFSF was held in December 2019 in Dhaka, Bangladesh, in conjunction with the 33rd Council Meeting of the IFSB.

Challenges & Opportunities in Global Islamic Finance Industry Stability
By: Henry MacNevin
Associate Managing Director, Banking EMEA
Moody’s Investors Service Limited
Nitish Bhojnagarwala
Vice President – Senior Credit Officer
Moody's Financial Institutions Group

The publication is available for download here.

 WP-12: JOINT IFSB–AMF WORKING PAPER ON MONEY LAUNDERING AND FINANCING OF TERRORISM (ML/FT) RISKS IN ISLAMIC BANKING
Issuance date: December 2019

This joint working paper between the IFSB and the Arab Monetary Fund examines money laundering and financing of terrorism (ML/FT) methods, trends and typologies as specifically related to Islamic banking contracts, structure and regulation, and attempts to address whether there is any evidence that ML/FT risks in Islamic banking are indeed different from those that arise in conventional banking. Based on responses to a survey of RSAs, the paper found no evidence of relative high susceptibility of both Islamic banking and Islamic social finance platforms to ML/FT risks compared to conventional banks. The paper concludes that there is no need to introduce specific regulations or preventive measures to address the ML/FT risks in Islamic banking, and that Islamic banks should adhere to their own country regulations and the Financial Action Task Force standards to combat ML/FT.

The publication is available for download here.

 WP-13: INTERMEDIARIES IN THE ISLAMIC CAPITAL MARKET
Issuance date: December 2019

The findings in WP-13 reveal that there are commendable licensing and entry requirements in place in various IFSB jurisdictions, as well as ongoing assessments of due compliance by ICM intermediaries with those requirements. While the ICM intermediaries are susceptible to conflict-of-interest risk, they nonetheless generally have internal mechanisms catering for the consequences arising therefrom. Finally, there seem to be procedures in place that provide early warning of potential failure of the ICM intermediaries prior to their infringing on the soundness and safety of the Islamic capital market.

The publication is available for download here.

 WP-14: REGULATORY AND SUPERVISORY ISSUES IN SHARĪʻAH-COMPLIANT HEDGING INSTRUMENTS
Issuance date: December 2019

The findings in WP-14 reveal that the risk profile of institutions offering Islamic financial services (IIFS) is not much different from that of the conventional banks, and thus credit risk, liquidity risk and rate-of-return risk were the main risks for Islamic institutions. Asset–liability alignment and wa’d emerged as the main hedging tools; however, in general, IIFS were either not using hedging instruments or lacked the motivation to utilise them. WP-14 also reveal that about half of the IIFS surveyed were aware that specific regulations pertain to the use of Islamic hedging instruments; however, since the regulations were not standardised across the globe, the application of hedging instruments was minimal.

The publication is available for download here.

 TN-3: TECHNICAL NOTE ON FINANCIAL INCLUSION AND ISLAMIC FINANCE
Issuance date: December 2019

The aim of TN-3 is to provide guidance on good practices in regulating the financial sector to enhance financial inclusion through Islamic finance, while also considering proportionality in balancing the benefits of regulation and supervision against the risks and costs. TN-3 underscores the importance of financial inclusion, due to its intricate connection with economic growth, shared prosperity and poverty reduction, while furthering an understanding of how financial inclusion policies and regulatory initiatives can support Islamic microfinance / savings / investment activities.

The publication is available for download here.

 GUIDANCE NOTE ON SHARIAH-COMPLIANT LENDER-OF-LAST-RESORT FACILITIES
Issuance date: December 2019

GN-7 is primarily intended to serve as a benchmark for Central Banks (CBs) in establishing and operationalising an SLOLR framework that applies to full-fledged Islamic commercial banks and Islamic commercial banks that are subsidiaries of conventional banks. The GN considers several essential features of an SLOLR arrangement, including eligibility criteria to access SLOLR; a non-exhaustive set of Sharī`ah-compliant structures and mechanisms that CBs could utilise for SLOLR purposes; the applicability of punitive rates to these mechanisms; Sharī`ah-compliant eligible collateral; and the relevant disclosures to be made by CBs to IIFS in their jurisdictions.

The publication is available for download here.

 REVISED COMPILATION GUIDE ON PRUDENTIAL AND STRUCTURAL ISLAMIC FINANCIAL INDICATORS (PSIFIS), 2019
Issuance date: December 2019

The PSIFIs Compilation Guide is a comprehensive document, which provides information on key indicators, compilation procedures, aggregations and consolidation procedures, etc. It provides assistance to the data suppliers, data compilers as well as the users of the PSIFIs data.The first Compilation Guide was issued by the IFSB in 2007, which was later updated in 2011. Some additional changes were made in the list of indicators and compiled in the Supplement to Compilation Guide on PSIFIs, 2015. In addressing latest global and domestic regulatory developments, the revised version of Compilation Guide on PSIFIs, 2019 covers guidance on collection, compilation and dissemination of PSIFIs for banking, capital markets and takāful institutions offering Islamic financial services.

The publication is available for download here.

Standards, Guiding Principles, Technical Notes and Working Paper Series

نبذة عن المجلس

مجلس الخدمات المالية الإسلامية هو هيئة دولية واضعة للمعايير تهدف لتطوير وتعزيز متانة صناعة الخدمات المالية الإسلامية واستقرارها، وذلك بإصدار معايير احترازية ومبادئ إرشادية لهذه الصناعة التي تضم بصفة عامة قطاعات المصرفية، وأسواق رأس المال، والتكافل (التأمين الإسلامي). كما يعد مجلس الخدمات المالية الإسلامية أبحاثًا وينسق مبادرات بشأن قضايا تتعلق بهذه الصناعة، كما ينظم طاولات مستديرة وندوات ومؤتمرات للجهات التنظيمية وأصحاب المصلحة في هذه الصناعة. ولتحقيق ذلك، يعمل مجلس الخدمات المالية الإسلامية مع مؤسسات دولية، وإقليمية، ووطنية ذات صلة، ومراكز أبحاث، ومعاهد تعليمية، ومؤسسات عاملة في هذه الصناعة.

منذ إنشاء مجلس الخدمات المالية الإسلامية، تم إصدار اثنين وثلاثين معيارًا، ومبدئًا إرشاديًا، وملاحظة فنية، خاصة بصناعة الخدمات المالية الإسلامية. وقد غطت هذه الإصدارات المجالات الآتية:
(المعيار رقم 1): المبادئ الإرشادية لإدارة المخاطر
(المعيار رقم 2): معيار كفاية رأس المال
(المعيار رقم 3): المبادئ الإرشادية لضوابط إدارة المؤسسات
(المعيار رقم 4): معيار الإفصاحات لتعزيز الشفافية وانضباط السوق للمؤسسات
(المعيار رقم 5): الإرشادات المتعلقة بالعناصر الرئيسة في إجراءات الرقابة الإشرافية للمؤسسات
(المعيار رقم 6): المبادئ الإرشادية لضوابط برامج الاستثمار الجماعي
(المعيار رقم 7): متطلبات كفاية رأس المال للصكوك، والتصكيك، والاستثمارات العقارية
(المعيار رقم 8): المبادئ الإرشادية لضوابط التأمين التكافلي
(المعيار رقم 9): المبادئ الإرشادية لسلوكيات العمل للمؤسسات التي تقدم خدمات مالية إسلامية
(المعيار رقم 10): المبادئ الإرشادية لنظم الضوابط الشرعية للمؤسسات التي تقدم خدمات مالية إسلامية
(المعيار رقم 11): معيار متطلبات الملاءة للتأمين التكافلي
(المعيار رقم 12): المبادئ الإرشادية لإدارة مخاطر السيولة للمؤسسات
(المعيار رقم 13): المبادئ الإرشادية لاختبارات الضغط للمؤسسات
(المعيار رقم 14): معيار إدارة المخاطر لشركات التكافل (التأمين الإسلامي)
(المعيار رقم 15): المعيار المعدل لكفاية رأس المال للمؤسسات
(المعيار رقم 16): الإرشادات المعدلة للعناصر الأساسية لإجراءات الرقابة الإشرافية على المؤسسات
(المعيار رقم17): المبادئ الأساسية للرقابة على التمويل الإسلامي (القطاع المصرفي)
(المعيار رقم 18): المبادئ الإرشادية لإعادة التكافل (إعادة التأمين الإسلامي)
(المعيار رقم 19): المبادئ الإرشادية الخاصة بمتطلبات الإفصاح لمنتجات سوق رأس المال الإسلامي (الصكوك وبرامج الاستثمار الجماعي الإسلامي)
(المعيار رقم 20): العناصر الأساسية في عملية المراجعة الرقابية لشركات التكافل وإعادة التكافل [قطاع التأمين الإسلامي]
(المعيار رقم 21): المبادئ الأساسية لتنظيم التمويل الإسلامي [قطاع سوق رأس المال الإسلامي]
(المعيار رقم 22): المعيار المعدل للإفصاحات الرامية إلى تعزيز الشفافية وانضباط السوق للمؤسسات التي تقدم خدمات مالية إسلامية [القطاع المصرفي]
(المبادئ الإرشادية رقم 1): الإرشادات المتعلقة بمعيار كفاية رأس المال: الاعتراف بالتصنيفات للأدوات المالية المتفقة مع أحكام الشريعة الإسلامية الصادرة من مؤسسات تصنيف ائتماني خارجية
(المبادئ الإرشادية رقم 2): الإرشادات المتعلقة بإدارة المخاطر ومعيار كفاية رأس المال: معاملات المرابحة في السلع
(المبادئ الإرشادية رقم 3): الإرشادات المتعلقة بممارسات دعم دفع الأرباح لأصحاب حسابات الاستثمار
(المبادئ الإرشادية رقم 4): الإرشادات المتعلقة بمعيار كفاية رأس المال: تحديد عامل "ألفا" في نسبة كفاية رأس المال
(المبادئ الإرشادية رقم 5): الإرشادات المتعلقة بالاعتراف بالتصنيفات الصادرة عن مؤسسات تصنيف ائتماني خارجية للتأمين التكافلي وإعادة التكافل
(المبادئ الإرشادية رقم 6): الإرشادات المتعلقة بالمعايير الكمية لإدارة مخاطر السيولة
(المبادئ الإرشادية رقم 7): المبادئ الإرشادية بشأن تسهيلات 'المسعف الأخير' المتفقة مع أحكام الشريعة ومبادئها
(الملاحظة الفنية رقم 1): قضايا تعزيز إدارة السيولة للمؤسسات التي تقدم خدمات مالية إسلامية: تطوير أسواق المال الإسلامية
(الملاحظة الفنية رقم 2): اختبارات الضغط للمؤسسات التي تقدم خدمات مالية إسلامية
(الملاحظة الفنية رقم 3): الملاحظة الفنية حول الشمول المالي والتمويل الإسلامي
(ورقة العمل رقم 1): تقوية شبكة الأمان المالي: دور تسهيلات المسعف الأخير المتوافقة مع أحكام الشريعة ومبادئها، بوصفها آلية تمويل في حالات الطوارئ
(ورقة العمل رقم 2): تقويم المبادئ الأساسية المتعلقة بالرقابة على التمويل الإسلامي
(ورقة العمل رقم 3): الحماية المالية للمستهلك في المالية الإسلامية
(ورقة العمل رقم 4): دراسة مقارنة حول مدى تفعيل المعايير الصادرة عن مجلس الخدمات المالية الإسلامية
(ورقة العمل رقم 5): ورقة العمل المشتركة بين مجلس الخدمات المالية الإسلامية والأكاديمية العالمية للبحوث الشرعية حول مخاطر عدم الالتزام بأحكام الشريعة ومبادئها في القطاع المصرفي: الأثر على إطار كفاية رأس المال للمصارف الإسلامية
(ورقة العمل رقم 6): تقوية شبكة الأمان المالية: دور وآليات نظم التأمين على الودائع المصرفية المتوافقة مع أحكام الشريعة ومبادئها
(ورقة العمل رقم 7): القضايا المتعلقة بتعافي وحل وتصفية المؤسسات التي تقدم خدمات مالية إسلامية
(ورقة العمل رقم 8): القضايا الناشئة من التغييرات في متطلبات رأس المال الخاصة بقطاع التكافل
(ورقة العمل رقم 9): حماية المستهلك في التكافل
(ورقة العمل رقم 10): تقاسم المخاطر في المصرفية الإسلامية
(ورقة العمل رقم 11): التحري عن الروابط بين القطاعات في صناعة الخدمات المالية الإسلامية
(ورقة العمل رقم 12): ورقة العمل المشتركة بين مجلس الخدمات المالية الإسلامية وصندوق النقد العربي عن مخاطر غسل الأموال وتمويل الإرهاب في المصرفية الإسلامية
(ورقة العمل رقم 13): الوسطاء في سوق رأس المال الإسلامي
(ورقة العمل رقم 14): قضايا تنظيمية ورقابية تخص أدوات التحوط المتفقة مع أحكام الشريعة ومبادئها
الجدير بالذكر أن المجلس يضم في عضويته منظمات دولية، وإقليمية، ووطنية، والشركاء الذين تجمعهم به أهداف مشتركة.

للمزيد من المعلومات حول مجلس الخدمات المالية الإسلامية وللحصول على المعايير والتقارير وأوراق العمل أو أي إصدارات أخرى الرجاء زيارة الموقع الإلكتروني http://arabic.ifsb.org

As of June 2020, the IFSB has published thirty-two Standards, Guiding Principles, Guidance and Technical Notes as follows:

IFSB-1:Guiding Principles of Risk Management for Institutions (other than Insurance Institutions) Offering Only Islamic Financial Services (IIFS)
IFSB-2:Capital Adequacy Standard for IIFS
IFSB-3:Guiding Principles on Corporate Governance for IIFS
IFSB-4:Disclosures to Promote Transparency and Market Discipline for IIFS
IFSB-5:Guidance on Key Elements in the Supervisory Review Process of IIFS
IFSB-6:Guiding Principles on Governance for Islamic Collective Investment Scheme
IFSB-7:Capital Adequacy Requirements: Sukūk Securitisations and Real Estate Investment
IFSB-8:Guiding Principles on Governance of Islamic Insurance (Takāful) Operations
IFSB-9:Guiding Principles on Conduct of Business for IIFS
IFSB-10:Guiding Principles on Sharī`ah Governance System
IFSB-11:Standard on Solvency Requirements for Takāful (Islamic Insurance) Undertakings
IFSB-12:Guiding Principles on Liquidity Risk Management for IIFS
IFSB-13:Guiding Principles on Stress Testing for IIFS
IFSB-14:Standard on Risk Management for Takāful (Islamic Insurance) Undertakings
IFSB-15:Revised Capital Adequacy Standard for IIFS
IFSB-16:Revised Guidance on Key Elements in the Supervisory Review Process of IIFS
IFSB-17:Core Principles for Islamic Finance Regulation (Banking Segment) Guiding Principles for Retakāful (Islamic Reinsurance)
IFSB-18:Guiding Principles for Retakāful (Islamic Reinsurance)
IFSB-19:Guiding Principles on Disclosure Requirements for Islamic Capital Market Product (Sukūk and Islamic Collective Investment Schemes)
IFSB-20:Key Elements in the Supervisory Review Process of Takâful/Retakâful Undertakings
IFSB-21:Core Principles for Islamic Finance Regulation [Islamic Capital Market Segment]
IFSB-22:Revised Standard on Disclosures to Promote Transparency and Market Discipline for IIFS [Banking Segment]
GN-1:Guidance Note in Connection with the Capital Adequacy Standard: Recognition of Ratings by External Credit Assessment Institutions (ECAIs) on Sharī`ah-Compliant Financial Instruments
GN-2:Guidance Note in Connection with the Risk Management and Capital Adequacy Standards: Commodity Murābahah Transactions
GN-3:Guidance Note on the Practice of Smoothing the Profits Payout to Investment Account Holders
GN-4:Guidance Note in Connection with the IFSB Capital Adequacy Standard: The Determination of the Alpha in the Capital Adequacy Ratio
GN-5:Guidance Note on the Recognition of Ratings by ECAIs on Takāful and Retakāful Undertakings
GN-6:Guidance Note on Quantitative Measures for Liquidity Risk Management in IIFS
GN-7:Guidance Note on Sharīʻah-compliant Lender-of-Last-Resort Facilities
TN-1:Technical Note on Issues in Strengthening Liquidity Management of Institutions Offering Islamic Financial Services: The Development of Islamic Money Market
TN-2:Technical Note on Stress Testing for Institutions Offering Islamic Financial Services
TN-3:Technical Note on Financial Inclusion and Islamic Finance
WP-01:Working Paper on Strengthening the Financial Safety Net: The Role of Sharī`ah-compliant Lender-of Last-Resort (SLOLR) Facilities as an Emergency Financing Mechanism
WP-02:Working Paper on Evaluation of Core Principles Relevant to Islamic Finance Regulation
WP-03:Working Paper on Financial Consumer Protection in Islamic Finance Comparative Study on the Implementation of Selected IFSB Standards
WP-04:Comparative Study on the Implementation of Selected IFSB Standards
WP-05:The IFSB-ISRA Joint Working Paper on Sharīʻah Non-Compliance Risk in the Banking Sector: Impact on Capital Adequacy Framework of Islamic Banks
WP-06:Strengthening the Financial Safety Net: The Role and Mechanisms of Sharīʻah-Compliant Deposit Insurance Schemes (SCDIS)
WP-07:Recovery, Resolution and Insolvency Issues for Institutions Offering Islamic Financial Services
WP-08:Issues Arising From Changes in Takāful Capital Requirements Consumer Protection in Takāful
WP-09:Consumer Protection in Takāful
WP-10:Risk Sharing in Islamic Banking
WP-11:Investigating Intersectoral Linkages in Islamic Financial Services Industry

The members of the IFSB comprise regulatory and supervisory authorities, international inter-governmental organisations and market players, professional firms and other industry stakeholders.

For more information about the IFSB and to download the Standards, Guiding Principles, Guidance and Technical Notes, please visit www.ifsb.org.

Upcoming Events

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  Event List

No.CategoryNameStart-End Date
1. Meetings 37th Islamic Financial Services Board (IFSB) Council Meeting S:10/12/2020
E:10/12/2020
2. Meetings 2nd Working Group Meeting on Revised Solvency Requirements for Takaful Undertakings S:03/12/2020
E:03/12/2020
3. Meetings 4th Meeting of the Executive Committee of the IFSB S:12/11/2020
E:12/11/2020
4. IFSB-FIS Workshop IFSB-FIS E-Workshop Series : Regulatory Capital for Islamic Banks S:09/11/2020
E:09/11/2020
5. Meetings 52nd Meeting of the Technical Committee of the IFSB S:02/11/2020
E:02/11/2020
6. Awareness Programme IFSB & IIFM High-Level Seminar in conjunction with Indonesia Shariah Economic Festival 2020 - Accelerating Islamic Capital Market Development and Digitalization S:30/10/2020
E:30/10/2020
7. IFSB-FIS Workshop IFSB-FIS E-Workshop Series : IFSB-14: Standard on Risk Management for Takaful Undertakings S:28/10/2020
E:28/10/2020