IFSB published answers to the selected frequently asked questions (FAQs) on four IFSB standards and guidelines. The standards and guidelines include guiding principles on Sharīʻah governance systems for Institutions offering Islamic Financial Services, or IIFS (IFSB-10), standard on solvency requirements for Takāful undertakings (IFSB-11), revised capital adequacy standard for IIFS (IFSB-15), and guidance note on quantitative measures for liquidity risk management in IIFS (GN-6); these standards and guidelines were published in December 2009, December 2010, December 2013, and April 2015, respectively. IFSB welcomes feedback for improvement of the FAQs, which provide additional clarifications on the standards.
FAQs on IFSB-10. IFSB-10 provides guidance on the principles of Sharīʻah governance systems. Therefore, the FAQs for IFSB-10 address key questions on how the Sharīʿahgovernance systems can complement the existing governance, control, and compliance functions within an IIFS. The responses also clarify suitable Sharīʻah governance structure to be adopted by IIFS in various jurisdictions.
FAQs on IFSB-11. These FAQs highlight key questions on overview of the standard and valuation of technical provisions. The FAQs also attempt to address the distinguishing factors between takāful undertakings and conventional insurance for solvency requirements.
FAQs on IFSB-15. The FAQ responses for IFSB-15 seek to clarify the qualifying criteria to be included in capital components of an IIFS. The FAQs also explain the definitions for different kinds of regulatory adjustments, for example, the treatments of pension funds, cash-flow hedge reserve, and zakāh obligations, among others. Examples of computation of risk-weighted assets for IFSB standard formula as well as supervisor discretion formula are illustrated in the FAQ answers.
FAQs on GN-6. The main objective of the GN-6 is to provide guidance of maintaining liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) by the IIFS. Therefore, the FAQs on this guidance note elaborate related issues on the eligibility criteria and other specific details on the eligibility criteria of Sharīʻah-compliant high-quality liquid assets as well as calculation methodologies. The FAQ responses also clarify the treatment of profit-sharing investment account for LCR purposes to determine appropriate run-off factors under different scenarios.
Keywords: International, Banking, Insurance, IFSB-10, IFSB-11, IFSB-15, GN-6, Solvency Requirements, Capital Adequacy, Liquidity Risk, IIFS, IFSB
Previous ArticleFASB Issues Summary of Tentative Board Decisions at August Meeting
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).