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The IFSB Issues the Exposure Draft of the Guidance Note on Deepening the Islamic Capital Markets (ED-GN-8) for Public Consultation

Date posted: 25 March 2022

25 March 2022, Kuala Lumpur - The Islamic Financial Services Board (IFSB) has today issued the Exposure Draft of the Guidance Note on Deepening the Islamic Capital Markets (ED-GN-8) for Public Consultation for a period of forty-five days, starting from 25 March 2022 until 26 May 2022. The IFSB invites comments from regulatory and supervisory authorities, international organisations, market players operating in the Islamic capital markets, academics and other interested parties by 26 May 2022.

The Guidance Note (GN) seeks to promote financial stability through deep and liquid Islamic financial systems with diverse instruments that will help enhance countries’ resilience to shocks, and in turn, also support the resilience of other parts of the Islamic financial services industry by providing a wider range of investments with better price discovery. In this regard, the GN aims to provide guidance and highlight best practices on developing and deepening the Islamic capital markets. Specifically, it seeks to:

  • Provide international best practices in developing and promoting the growth of Islamic capital markets
  • Provide guidance on deepening liquidity in the Islamic capital markets 
  • Provide guidance on strengthening regulatory frameworks and stability of Islamic capital markets
  • Promote the harmonisation of practices across Islamic capital markets

The GN identifies the current gaps and challenges in the development of Islamic capital markets based on a survey of IFSB members and outlines the necessary preconditions for the deepening of Islamic capital markets. The GN provides 13 recommendations on best practices for the development and deepening of Islamic capital markets, addressing the issues and gaps that were identified by members. The recommendations are designed to provide a list of potential areas for consideration in line with domestic regulatory frameworks and policy approaches for Islamic finance development, which includes:

  • Developing a holistic strategy for the development of Islamic capital markets
  • Increasing institutional investor participation
  • Deepening the liquidity in the Islamic capital market
  • Increasing retail investor participation
  • Promoting greater certainty for investors and standardisation of legal documentation and procedures for Sharīʿah-compliant issuances
  • Providing financing for the SMEs segment and infrastructure projects
  • Providing diversified investment choices in the Islamic capital markets
  • Reducing costs of issuance of Islamic capital market products
  • Developing benchmarks by expanding the maturity range and volume of sovereign sukūk issuance in domestic and foreign currency
  • Addressing the legal, regulatory and structural challenges in developing a wider range of Sharīʿah-compliant liquidity management tools in the Islamic capital markets
  • Implementing international standards and ensuring that regulatory requirements and supervisory frameworks adequately address any specific risks posed by Islamic capital market products and services
  • Integrating sustainability into legal and regulatory frameworks for Islamic capital markets considering the associated risks and opportunities
  • Encouraging, monitoring and regulating the development of technology-driven products, services and infrastructure in Islamic capital markets

The IFSB will be conducting a public hearing (via online webinar) on 21 April 2022 as part of the public consultation process. Participation in the webinar is free and open to all.

The soft copy of ED-GN-8 is available on the IFSB website, www.ifsb.org and the Secretariat invites all interested parties, especially members of the IFSB, to send their comments to the IFSB through email to public_consultation@ifsb.org  by 26 May 2022 at the latest.

 

 


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