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Background

The Islamic Financial Services Board (IFSB), which is based in Kuala Lumpur, was officially inaugurated on 3rd November 2002 and started operations on 10th March 2003. It serves as an international standard-setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance. In advancing this mission, the IFSB promotes the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing international standards consistent with Sharî'ah principles, and recommend them for adoption.

To this end, the work of the IFSB complements that of the Basel Committee on Banking Supervision, International Organisation of Securities Commissions and the International Association of Insurance Supervisors.

As at November 2011, the 189 members of the IFSB comprise 53 regulatory and supervisory authorities, eight international inter-governmental organisations and 128 market players, professional firms and industry associations operating in 44 jurisdictions.

Malaysia, the host country of the IFSB, has enacted a law known as the Islamic Financial Services Board Act 2002, which gives the IFSB the immunities and privileges that are usually granted to international organisations and diplomatic missions.

Adoption of Standards

Since its inception, the IFSB has issued seventeen Standards, Guiding Principles and Technical Note for the Islamic financial services industry. The published documents are on the areas of:

1. Risk Management (IFSB-1)
2. Capital Adequacy (IFSB-2)
3. Corporate Governance (IFSB-3)
4. Transparency and Market Discipline (IFSB-4)
5. Supervisory Review Process (IFSB-5)
6. Governance for Collective Investment Schemes (IFSB-6)
7. Special Issues in Capital Adequacy (IFSB-7)
8. Guilding Principles on Governance for Islamic Insurance (Takâful) Operations (IFSB-8)
9. Conduct of Business for Institutions offering Islamic Financial Services (IIFS) (IFSB-9)
10. Guiding Principles on Sharî'ah Goverance System (IFSB-10)
11. Standard on Solvency Requirements for Takâful (Islamic Insurance) Undertakings (IFSB-11)
12. Recognition of Ratings on Sharî'ah-Compliant Financial Instruments (GN-1)
13. Guidance Note in Connection with the Risk Management and Capital Adequacy Standards: Commodity Murâbahah Transactions (GN-2)
14. Guidance Note on the Practice of Smoothing the Profits Payout to Investment Account Holders (GN -3)
15. Guidance Note in Connection with the IFSB Capital Adequacy Standard: The Determination of Alpha in the Capital Adequacy Ratio for Institutions (other than Insurance Institutions) offering only Islamic Financial Services (GN-4)
16. Guidance Note on the Recognition of Ratings by External Credit Assessment Institutions (ECAIS) on Takâful and ReTakâful Undertakings (GN-5)
17. Development of Islamic Money Markets (TN-1)

The standards prepared by the IFSB follow a lengthy due process as outlined in its Guidelines and Procedures for the Preparation of Standards/Guidelines which involve, among others, the issuance of exposure draft and, where necessary, the holding of a public hearing.

Awareness Promotion

The IFSB is actively involved in the promotion of awareness of issues that are relevant or have an impact on the regulation and supervision of the Islamic financial services industry. This mainly takes the form of international conferences, seminars, workshops, trainings, meetings and dialogues staged in many countries.

See Speeches delivered at the IFSB Inauguration Ceremony (November 2002)

1. Welcoming Speech by Governor, Bank Negara Malaysia, Dr. Zeti Akhtar Aziz
2. Keynote Address by (then) Malaysian Prime Minister, Dr. Mahathir Mohammad