November 01, 2018

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.

 

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Keywords: International, Banking, Insurance, IFSB-10, IFSB-11, IFSB-15, GN-6, Solvency Requirements, Capital Adequacy, Liquidity Risk, IIFS, IFSB

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