Featured Product

    IFSB Issues Paper on Recovery, Resolution, and Insolvency of IIFS

    December 27, 2017

    IFSB issued a working paper (WP-07) on recovery, resolution, and insolvency issues for Institutions offering Islamic Financial Services (IIFS). The paper sheds light on several legal, structural, and operational issues in the context of recovery, resolution, and insolvency for IIFS. It endeavors to make policymakers, regulators, deposit insurance providers, and individual institutions aware of these challenges. The paper reiterates the need to harmonize Sharīʻah principles of recovery and resolution plans as well as bankruptcy and insolvency frameworks that are embodied in the existing legal systems.

    The working paper also examines the applicability of FSB's Key Attributes of Effective Resolution Regimes for Financial Institutions and other relevant international standards on this subject for IIFS. It identifies gaps in implementation of these standards, since these international standards do not take cognizance of unique characteristics of these institutions. The paper also examines the possibilities of adopting self-insured structures and mechanisms to help safeguard the IFSI. In this regard, bail-in features embedded in Additional Tier 1 and Tier 2 ṣukūk from regulatory and Sharīʻah perspectives are discussed in detail. The paper also attempts to investigate whether the bail-in concept of a mandatory debt write-down by a resolution authority is compatible with Sharīʻah. Overall, the paper aims to:

    • Review the requirements of a robust recovery and resolution framework through literature review and jurisdictional analysis
    • Consider and analyze key recovery, resolution, and bankruptcy principles in the context of Islamic finance industry practices and Sharīʻah requirements
    • Indicate issues that require further consideration by regulatory authorities/policymakers and IIFS regarding recovery, resolution, and bankruptcy

    Additionally, the paper examines the treatment of investment account holders in an insolvency and the treatment of the profit equalization reserve (PER) and investment risk reserve (IRR) funds in this scenario. The discussions also highlight Sharīʻah debates on whether any profit-sharing investment accounts should be afforded Sharīʻah-compliant deposit insurance scheme, given their risk-sharing nature. The paper also focuses on recovery and resolutions aspects for debt-based contracts in Islamic finance, since a majority of global Islamic banking assets are based on these contracts.

     

    Related Links

    Keywords: International, Banking, Islamic Banking, IIFS, Recovery and Resolution Planning, IFSB

    Related Articles
    News

    EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR

    EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).

    July 01, 2020 WebPage Regulatory News
    News

    FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform

    FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS on Package for 2020 Data Collection on ICS and Aggregation Method

    IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.

    June 30, 2020 WebPage Regulatory News
    News

    BIS to Establish More Innovation Hubs in Europe and North America

    BIS announced that it will establish new Innovation Hub centers across Europe and in North America in cooperation with member central banks.

    June 30, 2020 WebPage Regulatory News
    News

    FED Updates Form FR 2052a for LCR Reporting by Banks

    FED updated the reporting form for FR 2052a, which is used to monitor the overall liquidity profile of certain supervised institutions.

    June 30, 2020 WebPage Regulatory News
    News

    PRA Statement on Changes to CRR in Response to COVID-19 Crisis

    PRA published a statement that sets out its views on certain amendments made to Capital Requirements Regulations (CRR and CRR2) via EU Regulation 2020/873 (CRR "Quick Fix"), including some guidance for firms.

    June 30, 2020 WebPage Regulatory News
    News

    PRA Proposes Approach for Publishing Solvency II Technical Information

    PRA is proposing (CP5/20) an approach for publication of Solvency II technical information after the end of the transition period for Brexit.

    June 30, 2020 WebPage Regulatory News
    News

    FASB Announces Upgrade of SEC EDGAR System to Release 20.2

    FASB announced that SEC has upgraded the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system to Release 20.2.

    June 30, 2020 WebPage Regulatory News
    News

    CFRF Publishes Guide for Addressing Climate-Related Financial Risks

    The Climate Financial Risk Forum (CFRF), which is a joint climate risk forum of FCA and PRA, published a guide written by the industry for the industry to help firms approach and address climate-related financial risks.

    June 29, 2020 WebPage Regulatory News
    News

    IAIS Paper Provides Guidance on Liquidity Risk Management for Insurers

    IAIS published an application paper on liquidity risk management for insurers.

    June 29, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5414