IFSB Guidance on Lender of Last Resort Facilities for Islamic Banks
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.
Related Links
Keywords: International, Banking, Lender of Last Resort, Sharī`ah, Fintech, SLOLR, Islamic Banking, Guidance, IFSB
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.