The IFSB Welcomes IMF Executive Board's Decision to Formally Recognise IFSB Core Principles for Islamic Finance Regulation (CPIFR) for Banking in its Surveillance Programme
Date posted: 28 May 2018
28 May 2018, Kuala Lumpur - The Islamic Financial Services Board (IFSB) welcomes the International Monetary Fund (IMF) Executive Board's recent endorsement of the IFSB "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) from January 2019, for both fully Islamic banking systems as well as systemically significant Islamic banking systems in dual banking markets.
Noting the IMF's press release (dated 24 May 2018) on this matter, the Secretary-General of the IFSB, Dr. Bello Lawal Danbatta remarked, "The IFSB welcomes the IMF Executive Board's recent endorsement of the IFSB CPIFR for the banking sector and associated assessment methodology as a part of its surveillance programme for the banking sector globally. Similarly, the IFSB remains ready to support the Executive Board's call for stronger efforts to strengthen the regulatory and supervisory frameworks to promote financial stability and sound development in countries where Islamic banking services are being offered, as highlighted in detail in the recent IMF Policy Paper on this subject."
Dr. Danbatta further added, “The IMF Executive Board's statement reflects the high-level emphasis and efforts undertaken here at the IFSB in response to international developments with a series of next-generation prudential standards and guiding principles that align global regulatory frameworks with the specificities of Islamic finance. Our work programme in recent years and years to come placed high priority on developing standards that placed emphasis on higher and better quality capital and liquidity buffers in institution offering Islamic financial services (IIFS), and an increased focus on supervisory review process, macroprudential regulation and stress testing exercises – while being complementary to the standards issued by the Basel Committee on Banking Supervision (BCBS), the International Organization of Securities Commissions (IOSCO), and the International Association of Insurance Supervisors (IAIS).”
The IMF's Executive Board highlighted that the CPIFR will complement the international architecture for financial stability, while providing incentives for improving the prudential framework for Islamic banking industry across jurisdictions. Similarly, the CPIFR will be relevant for macro-financial approach to supervisory standards assessments undertaken by the IMF and the World Bank. The statement also reveals that “jurisdictions might need assistance to enhance their capabilities to identify and monitor emerging risks, to understand the linkages that might exist with other sectors, and to ensure effective supervision with a risk-based approach, which involves a systemic and macroprudential dimension.”
Dr. Danbatta also commented, “The IFSB remains committed to maintaining close cooperation between the IFSB and the IMF/World Bank as well other international standard setters for conventional sector, including the BCBS, to ensure respective standards on conventional and Islamic finance remain consistent. Our CPIFR initiative is proceeding with the coverage of Islamic capital market and deposit insurance sector during 2018 and Islamic insurance (Takāful) sector in the coming years.” “The IFSB will continue assisting the regulatory and supervisory authorities in its member jurisdictions in the implementation of IFSB Standards through its comprehensive set of initiatives involving workshops, technical assistance, policy advice and e-learning platform.” He added, “We are taking steps to further strengthen our implementation programme by adding the dimension of consistency and impact assessment of the implemented standards.”
The IFSB was established in 2002 with a mandate to develop prudential standards for Islamic financial services industry. Since its inception, the IFSB has issued twenty-seven Standards, Guiding Principles as well as Guidance and Technical Notes covering Islamic banking, Islamic capital market, Takāful as well as cross-sector areas. The standards prepared by the IFSB follows a stringent due process as outlined in its Guidelines and Procedures for the Preparation of Standards and Guidance/Technical Notes which involve, among others, the establishment of a working group, issuance of exposure draft for public consultation and review by the Sharīʻah Board and Technical Committee, before final approval by the Council. As at May 2018, the 185 members of the IFSB comprise 75 regulatory and supervisory authorities, eight international inter-governmental organisations (including the IMF and the World Bank), and 102 market players (financial institutions, professional firms and industry associations) operating in 57 jurisdictions.
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