The Islamic Financial Services Board (IFSB) on Wednesday issued an Exposure Draft (ED) of Guidance Note in Connection with the Capital Adequacy Standard: Recognition of Ratings by External Credit Assessment Institutions (ECAI) on Shari’ah Compliant Financial Institutions for a three-month public consultation period ending 19 December 2007.
Secretary General of the IFSB, Professor Rifaat Ahmed Abdel Karim said, “This ED proposes that Shari’ah-compliant financial assets should be regarded as a separate asset class for which ECAI should develop a dedicated rating methodology, and provides some principal areas which take into consideration the specificities of Shari’ah-compliant finance that may differ from their conventional counterparts.”
The Guidance Note aims to complement the existing IFSB Capital Adequacy Standard which was issued in December 2005 in providing guidance to national supervisors who will be recognising ECAI whose ratings may be used by institutions offering Islamic financial services in reporting their risk-weighted capital ratios. It will also provide industry stakeholders and market players useful insight into the intricacies of Islamic finance, particularly the development of varying methodologies employed in the rating of Shari’ah-compliant instruments.
The IFSB welcomes comments on the ED, which is part of its due process for the preparation of Standards and Guidelines. All IFSB Standards, Guidelines and EDs are available at the IFSB website www.ifsb.org
