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The IFSB Issues Exposure Draft 16 for Public Consultation

Date posted: 30 October 2013

30 October 2013, Kuala Lumpur - The Islamic Financial Services Board (IFSB) issues Exposure Draft 16 (ED-16) for a two-and-half-month Public Consultation period starting 28 October 2013 to 10 January 2014, and invites comments from regulatory and supervisory authorities, international organisations, market players, academics and other interested parties. ED-16 is the Exposure Draft on “Revised Guidance on Key Elements in the Supervisory Review Process of Institutions offering Islamic Financial Services (excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes).”

In line with the IFSB due process on the development of Standards and Guiding Principles, the IFSB will be organising a Public Hearing for ED-16 on 26 November 2013 in Kuala Lumpur, Malaysia. A second Public Hearing will be held in December 2013 in the Middle East.

The contact person for the Public Hearing is Ms. Nur Khairun Nissa (khairun.nissa@ifsb.org, tel: + 603 9195 1423, fax: + 603 9195 1405).

Details on the Exposure Draft are as follows:
The overall aim of the revised Standard is to revise and replace IFSB-5 in setting forth guidance on key elements in the supervisory review process for authorities supervising institutions offering Islamic financial services (IIFS) taking into consideration the specificities of the IIFS, the lessons learned from the recent global financial crisis, while complementing the existing international standards on supervisory review process. ED-16 thus helps the supervisory authorities to provide a level-playing field to the IIFS vis-a-vis their conventional counterparts, and thus promotes the financial soundness and of the Islamic financial services industry (IFSI).

ED-16, which takes a risk-based approach to the process of supervisory review, covers, inter alia, the following areas:

  • Regulatory capital requirements
  • Internal capital adequacy assessment process (ICAAP)
  • Risk management, including enterprise risk management
  • Corporate and Sharī`ah governance
  • Securitisation exposures
  • Concentration risk and counterparty risk
  • Assessment of the rate of return risk in the banking book
  • Sound stress testing practices
  • Islamic windows operations
  • Consolidated and home-host supervision, and supervisory colleges
  • Transparency and market discipline.

The softcopy of the ED and information on the Public Hearings are available on the IFSB website, www.ifsb.org. Participation of the Public Hearings is free and open to all.

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