The IFSB Publishes Its Fourth Set of Frequently Asked Questions (FAQs) on IFSB-12, IFSB-13, IFSB-24 and IFSB-25
Date posted: 6 October 2021
6 October 2021, Kuala Lumpur, Malaysia – The IFSB is releasing its fourth set of Frequently Asked Questions (FAQs) on four of its standards, namely, Liquidity risk management (IFSB-12), Stress testing (IFSB-13), Investor protection in Islamic Capital Markets (IFSB-24), and Promoting transparency and market discipline for takāful/retakāful undertakings (IFSB-25). The new set of FAQs is a continuation of three previous sets aims at enhancing the implementation of IFSB standards among the member jurisdictions through presenting clarifications and explanative directions on the issued standards for a better understanding, and thus, more effective implementation.
Today’s issuances cover selected FAQs on four IFSB standards, namely:
- Guiding Principles on Liquidity Risk Management for Institutions Offering Islamic Financial Services [Excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes] (IFSB-12);
- Guiding Principles on Stress Testing for Institutions Offering Islamic Financial Services (IFSB-13);
- Guiding Principles for Investor Protection in Islamic Capital Markets (IFSB-24);
- Disclosures to Promote Transparency and Market Discipline for Takāful/Retakāful Undertakings” (IFSB-25)
The Secretary-General of the IFSB, Dr. Bello Lawal Danbatta, mentioning the significance of the issuances of a new set of FAQs: “The IFSB puts its membership support as a priority, and we strongly believe that the continuity of this support is crucial. Therefore, the release of this new set of FAQs will enhance the understanding and awareness regarding IFSB standards, especially that we have received good feedback from our members regarding the role of FAQs in implementing these standards”.
The FAQs for IFSB-12 give explanations and guidelines about the main principles in the effective management of liquidity risk in institutions offering Islamic financial services (IIFS). These include identification and measuring liquidity risk, and the role of the institution’s top management and supervisors. The questions also enquire about the key factors in controlling and mitigating liquidity risk, and how to report and disclose this risk. In addition, the FAQs provide clarifications related to liquidity risk management at the consolidated level along with home-host and cross-sector supervision for liquidity risk.
The second FAQs include responses to questions raised about IFSB-13, i.e. regarding the stress testing conducted by IIFS. Among those questions were, for example, the differences between scenario analysis and sensitivity tests, the role of Supervisory Sharīʻah Board (SSB) in stress testing framework, stress testing related to capital planning, model and parameter risks posed by using models for stress testing.
IFSB-24 covers issues related to investor protection in Islamic Capital Market (ICM) sector. Thus, the FAQs for this standard are mainly about classification of ICM investors, investment education, monitoring Sharīʻah compliance for ICM institutions.
Questions related to the fourth standard – IFSB-25 –, which is the latest issued IFSB standard so far, address enquires concerning transparency and market discipline within the takāful and retakāful segments. The provided answers clarify the best practices in prudential disclosures for takāful and retākaful operators, in addition to the information that should be provided to customers for a better understanding of the takāful and retakāful products. Moreover, this FAQs answer technical questions related to risks and technical provisions in takāful industry.
The IFSB welcomes enquires, suggestions and comments for improvement of the FAQs, providing more clarification of the standards. Comments and suggestions may be sent to email@example.com. These FAQs are available on the IFSB website under the ‘Standards Development’ section, www.ifsb.org.
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