IFSB Council Adopts IFSB-20, IFSB-21, and IFSB-22
The IFSB Council resolved to approve the adoption of three new standards at its 33rd meeting in Jeddah, the Kingdom of Saudi Arabia. The three new standards include key elements in the supervisory review process of Takāful/Retakāful Undertakings (IFSB-20), core principles for Islamic Finance Regulation (IFSB-21), and revised standard on disclosures to promote transparency and market discipline for Institutions Offering Islamic Financial Services, or IIFS (IFSB-22).
IFSB-22. This standard updates IFSB-4, the previous standard on disclosures for the banking segment, in line with the publications issued by BCBS related to Pillar 3 disclosure requirements. IFSB-22 specifies a set of key principles and practices to be followed by Islamic banks in making disclosures and aims to promote consistency and comparability of disclosures by introducing harmonized templates for disclosure of quantitative information in key areas, including capital adequacy, regulatory risk exposures, investment accounts, and Sharīʻah governance. Disclosure requirements set out in IFSB-22 have been designed to enable market participants, especially the investment account holders, to assess key information on the type of IIFS and the scope of the consolidation method used by members of an Islamic financial group; capital structure and overview of capital adequacy; linkages between accounting and regulatory scopes of consolidation; the risk management process; and key aspects of general governance and Sharīʻah governance. Such disclosures, when combined with adequate market and legal infrastructures, can improve consumer protection practices among IIFS and enable market forces to enhance the stability and soundness of Islamic finance and reinforce other IFSB standards.
IFSB-21. This standard sets out 38 high-level core principles and their associated assessment methodology, which describes a broad, general framework for the regulation of Islamic capital markets. The core principles in the new standard take into consideration the specificities of Islamic finance, while complementing the existing international standards, principally "Objectives and Principles of Securities Regulation and its Methodology," which were issued by IOSCO in May 2017. IFSB envisages that IFSB-21 will be used by jurisdictions as a benchmark for assessing the quality of their regulatory and supervisory systems and for identifying the future work to achieve a baseline level of sound regulations and practices for Islamic capital markets products and services.
IFSB-20. This standard is intended to guide the firm-level supervision of Takāful/Retakāful Undertakings by providing guidance on the implementation of common approaches to the supervision of the takāful and retakāful industry, while addressing the specificities of these institutions. This is to protect the interests of the contracting parties in Takāful/Retakāful Undertakings and the long-term stability of the takāful system. The standard describes the key elements of supervisory review process that constitute seven essential elements for supervision of Takāful/Retakāful Undertakings. These elements present a clear overview of issues in the supervision of takāful and retakāful sector in an integrated form.
Keywords: International, Banking, Securities, Insurance, IFSB-20, IFSB-21, IFSB-22, Islamic Banking, Islamic Finance, Pillar 3, IFSB
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