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
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.