IFSB Consults on Guidance Note for Shariah-Compliant LOLR Facilities

ED GN-7 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. The exposure draft covers several essential features of an SLOLR arrangement, including the following:

• Preconditions for developing and implementing an SLOLR mechanism
• Eligibility criteria to access SLOLR
• Non-exhaustive selection of Sharī`ah-compliant structures and mechanisms that central banks could utilize for SLOLR purposes
• Applicability of penalty rates to these mechanisms
• Sharī`ah-compliant eligible collateral
• Relevant disclosures to be made by central banks to IIFS in their jurisdictions

Central banks are expected to start implementation of this guidance note from January 01, 2021, taking into account the time needed to prepare the necessary market infrastructure; to run appropriate assessments on eligible collateral, haircuts, and Sharī`ah-compliant structures; and to make the necessary disclosures to IIFS in their jurisdictions.

Related Links

• Press Release
• Exposure Draft (PDF)

Comment Due Date: July 05, 2019

Effective Date: January 01, 2021

Keywords: International, Banking, SLOLR, IIFS, Guidance Note, Lender of Last Resort, Islamic Banking, IFSB