IFSB Seminar discusses Emerging Sharī`ah Issues in Regulatory Capital and Risk Management in Islamic Banking
Kuala Lumpur, 19 January 2012 – The Islamic Financial Services Board (IFSB) is currently in the process of revising its Capital Adequacy Standard (IFSB-2) for institutions offering Islamic financial services (IIFS), which was issued in 2005. The IFSB Secretary-General Mr. Jaseem Ahmed stated that, “Parallel to the developments taking place in the Basel Committee, we started our revision process in January 2011”.
He added that the adoption of components of capital proposed by the Basel III for IIFS need further deliberations by the stakeholders of the Islamic financial services industry. He highlighted specific issues related to the appropriate treatment of subordinated debt, hybrid debt capital, convertible contingent capital and other types of Sharī`ah-compliant instruments/Sukūk as a part of capital. These issues are among those identified by the IFSB working group entrusted with the task of revising IFSB-2. The final draft of the revised document is planned for issuance by the IFSB Council in 2013.
The Secretary-General was speaking at the Opening Session of the Seminar on Emerging Issues in Regulatory Capital and Risk Management in Islamic Banking held on 17 and 18 January 2012, organised by the IFSB in Brunei Darussalam. The Seminar was hosted by the Autoriti Monetari Brunei Darussalam (AMBD), with the support of the Centre for Islamic Banking, Finance and Management, Brunei (CIBFM).
At the same event, Managing Director of AMBD, His Excellency Hj Mohd Rosli Hj Sabtu said that IIFS cannot afford to be complacent although they are currently not exposed to the high leverage and excesses of conventional finance. He further lauded the IFSB for its step in aligning Islamic banking with its conventional banking counterparts in terms of standards and infrastructure.
The speakers at the Seminar highlighted the various Sharī`ah and regulatory issues related to components of capital, credit risk, equity investment risk, market risk, operational risk and profit sharing investment accounts. The speakers, who represented a number of jurisdictions, shared the experiences of IIFS in their jurisdictions related to capital adequacy and risk management and pointed out the areas which can be covered in the revised capital adequacy standard being prepared by the IFSB.
The Seminar was attended by 80 delegates from among the Bruneian international financial community as well as representatives of the IFSB member countries and organisations, including Bank Negara Malaysia, Saudi Arabian Monetary Agency, Saudi Fund for Development, the Ministry of Finance and Economy, Senegal and the Central Bank of Sudan.
