The Council of the Islamic Financial Services Board (IFSB) approved its strategic performance plan for 2022-2024 and adopted two standards in the form of a revised capital adequacy standard (IFSB-23) and a standard on core principles for Islamic finance regulation (IFSB-26). The strategic performance plan focuses on four strategic key result areas: formulating and issuing prudential standards, research, and statistics; facilitating the implementation of prudential standards and capacity development; increasing value in the IFSB membership, global visibility, and attractiveness; and efficiently managing of resources with good corporate governance practices. This strategic plan retains the strategic framework of the strategic performance plan for 2019-2021 with enhanced focus on certain aspects.
The IFSB-26 standard contains a comprehensive set of 25 core principles that apply to payment systems, central securities depositories, securities settlement systems, central counterparties, and trade repositories (collectively referred to as financial market infrastructures) that undertake Sharīʿah-compliant activities and transactions. The IFSB-26 standard complements the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions (CPSS-IOSCO) Principles for Financial Market Infrastructure (PFMI) and the associated Disclosure Framework and Assessment Methodology; it addresses the areas in which the existing CPSS-IOSCO documents either do not deal, or deal inadequately with the specificities of Islamic finance. It also considers lessons learned from the COVID-19 pandemic, particularly in areas relating to the operational resilience of financial market infrastructures. Additionally, IFSB-23, which is the revised capital adequacy standard, was developed to align the IFSB guidance on capital adequacy for banking sector with the latest updates to global capital standards, particularly those issued by the Basel Committee on Banking Supervision. The standard aims to:
- Assist the institutions offering Islamic financial services and their supervisory authorities in the implementation of a capital adequacy framework, which will ensure effective coverage of risk exposures of institutions and allocation of appropriate capital to cover these risks
- Provide an updated framework for regulatory capital components for institutions offering Islamic financial services, that comply with ShIarī`ah rules and principles
- Review and enhance the capital adequacy requirements for various risk exposures related to Shar’iah complaint products and services offered by institutions offering Islamic financial services
- Enhance the capital adequacy treatment for institutions offering Islamic financial services exposures relating to investments in Sukūk and securitization, in line with the current global regulatory standards and the development in the Islamic financial services industry
- Delineate guidance on the application of leverage ratio and other macro-prudential measures for institutions offering Islamic financial services
- Adapt international best practices and current and emerging standards related to capital adequacy for institutions offering Islamic financial services
Keywords: International, Banking, Securities, Regulatory Capital, IFSB 23, IFSB 26, Core Principles, Basel, Strategic Plan, Shariah, Islamic Banking, PFMI, IFSB
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