The IFSB Council resolved to approve the adoption of a guidance note on Sharī`ah-compliant lender-of-last-resort facilities (GN-7) and a technical note on financial inclusion and Islamic finance (TN-3). The guidance note on lender-of-last-resort facilities complements the existing IFSB guidance on Sharī`ah-compliant lender of last resort (SLOLR). It aims to offer international benchmark guidelines to regulatory and supervisory authorities for developing and offering SLOLR facilities as part of the financial safety net arrangement for institutions offering Islamic financial services in their jurisdictions.
The guidance note is primarily intended to serve as a benchmark for central banks in establishing and operationalizing an SLOLR framework that applies to full-fledged Islamic commercial banks and Islamic commercial banks that are subsidiaries of conventional banks. Specifically, the guidance note covers the following:
- Preconditions for developing and implementing an SLOLR mechanism, including considerations of moral hazard and achieving a level playing field between the conventional and Islamic systems
- Sharī`ah perspectives on instruments and operating modalities for developing SLOLR facilities for institutions offering Islamic financial services
- Supervisory and operational considerations for SLOLR
- Broader integration of SLOLR within the macro-prudential framework and its implications from a monetary policy perspective
The technical note on financial inclusion provides guidance on good practices in regulating the financial sector to enhance financial inclusion through Islamic finance, while identifying the main challenges and emerging issues, as experienced by the market players and regulators, in microfinance and financial inclusion related to Islamic financial services. The note also aims to provide international benchmark guidelines on regulatory and supervisory policies to support financial inclusion initiatives in the Islamic financial services industry and on the application of the proportionality principle. The scope of the technical note includes the banking sector, the non-bank financial institutions, and the Islamic capital market with role in promoting financial inclusion, where needed.
Keywords: International, Banking, Lender of Last Resort, Sharī`ah, Fintech, SLOLR, Islamic Banking, Guidance, IFSB
Previous ArticleECB Publishes Results of Financial Stability Review in November 2019
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.