Kuala Lumpur, March 31, 2011 – The 18th meeting of the Council of the Islamic Financial Services Board (IFSB), chaired by H.E. Faris A. Sharaf, Governor of the Central Bank of Jordan, was held today in Amman, Jordan. The Meeting was hosted by the Central Bank of Jordan, and was attended by Governors of Central Banks and representatives of supervisory and regulatory authorities from among the IFSB member organisations. The Council meeting was followed by the IFSB General Assembly and the Third Islamic Financial Stability Forum.
The 18th Meeting of the Council approved the adoption of the following two Guidance Notes:
1. 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)
GN-4 complements the IFSB Standard on Capital Adequacy for Institutions offering Islamic Financial Services (IIFS) (IFSB-2), which was issued in December 2005.
IFSB-2 proposes two methods to calculate capital adequacy ratios of IIFS. This Guidance Note aims to:
a. Provide a methodology to estimate the value of “alpha” to be used in the
supervisory discretion formula in calculating capital adequacy ratio of IIFS; and
b. Demonstrate how to measure the displaced commercial risk, that is the additional
risk that IIFS shareholders may assume in order to cushion the returns payable
to investment account holders against variations in asset returns.
2. Guidance Note on the Recognition of Ratings by External Credit Assessment Institutions (ECAIs) on Takāful and ReTakāful Undertakings (GN-5)
The objective of GN-5 is to facilitate the emergence of generally accepted criteria for the recognition by national supervisory authorities and the wider financial community of credit ratings on Takāful and ReTakāful undertakings. It aims to:
a. Facilitate greater use of credit ratings on Takāful and ReTakāful undertakings;
b. Provide supervisory authorities with minimum standards and criteria for their
recognition of ECAIs;
c. Foster convergence among supervisory authorities supervising Takāful and
ReTakāful undertakings;
d. Facilitate discussion on the appropriate role, if any, which ratings by ECAIs on
Takāful and ReTakāful undertakings might play as part of a wider supervisory
process; and promote further discussion about ECAI methodologies and enhance
the transparency of those methodologies.
The Council also admitted the following three new members into the IFSB membership:
and upgraded the Islamic Corporation for the Insurance of Investment and Export Credit from Observer to Full Member.
The full list of the IFSB members and softcopies of the newly adopted documents will be available on the IFSB website (www.ifsb.org) in due course.
