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The IFSB Council Adopts IFSB-26, the Core Principles for Islamic Finance Regulation (Financial Market Infrastructures)

Date posted: 10 December 2021

10 December 2021, Abu Dhabi, United Arab Emirates - The Council of the Islamic Financial Services Board (IFSB) at its 39th Meeting held on 9 December in Abu Dhabi, resolved to approve the adoption of IFSB-26, the Core Principles for Islamic Finance Regulation (Financial Market Infrastructures).

The new IFSB Core Principles Standard ("CPIFRFMI") contains a comprehensive set of 25 core principles that apply to payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories (collectively referred to as financial market infrastructures or "FMIs") that undertake Sharīʿah-compliant activities and transactions. The Standard is designed and issued to ensure that the essential infrastructure supporting global Islamic financial markets are robust and effectively address the specificities of Islamic finance and contribute to the stability of the industry. 

The new Standard complements the CPSS-IOSCO Principles for Financial Market Infrastructure ("PFMI") (April 2012) and its associated Disclosure Framework and Assessment Methodology (December 2012), and addresses, in particular, those areas in which the existing CPSS-IOSCO Documents either do not deal, or deal inadequately with the specificities of Islamic finance. It also takes into account lessons learned from the COVID-19 pandemic, particularly in areas relating to the operational resilience of FMIs.

The Standard intends to achieve the following objectives:

  • to develop a comprehensive standard for effective regulation, supervision, and oversight of FMIs addressing the specificities relating to Islamic finance; 
  • to equip RSAs with minimum international benchmarks to ensure safe, transparent, and robust FMIs for the purpose of preserving financial stability and operational efficiency in Islamic finance jurisdictions; and
  • to assist the RSAs in assessing the quality of their regulatory framework for their respective FMIs and identifying areas for improvement as an input to their reform agenda.

The IFSB envisages that the CPIFRFMI will be used by jurisdictions as a benchmark for assessing the quality of their regulatory and supervisory systems, and for identifying future work to achieve a baseline level of sound regulations and practices for Islamic FMIs.

The development of CPIFRFMI is intended to promote further integration of Islamic finance with the international architecture for financial stability and operational efficiency, especially in the area of securities clearing and settling, payment, and data recording in the FMIs. Furthermore, the CPIFRFMI may also assist IFSB member jurisdictions in: (a) the International Monetary Fund (IMF) and the World Bank financial sector assessment programme (FSAP); (b) self-assessment; (c) reviews conducted by private third parties; and (d) peer reviews conducted, for instance, within regional groupings of capital market RSAs.

The 39th meeting of the IFSB Council, hosted by the Central Bank of the United Arab Emirates was held on 9 December 2021 in Abu Dhabi, United Arab Emirates (physical and online). The Council Meeting was chaired by H.E. Khaled Mohamed Balama, Governor of Central Bank of the United Arab Emirates and Chairman of the IFSB for 2021, attended by the Central Bank Governors, Deputy Governors, Heads of regulatory and supervisory authorities, senior representatives from among the Council and Full members of the IFSB, representing 22 countries.

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