The Islamic Financial Services Board (IFSB) published an exposure draft of Technical Note-4 on recovery and resolution for institutions offering Islamic financial services. IFSB invites comments, until December 20, 2021, from central banks, regulatory and supervisory authorities, international organizations, institutions offering Islamic financial services, academics and other interested parties.
The proposed draft is aimed to complement the existing Key Attributes of the Financial Stability Board (FSB) by providing complementary standards and information addressing the idiosyncrasies of Islamic finance and Sharī‘ah compliance requirements applicable to each Key Attribute. In addition, the Technical Note on Recovery and Resolution intends to provide guidance that addresses Sharī‘ah specificities in relation to the high-level recovery and resolution framework and the recovery planning process for institutions offering Islamic financial services, which are not covered in the FSB’s Key Attributes. The primary objective of the Technical Note is to facilitate the relevant regulatory and supervisory authorities and other related authorities to establish an effective recovery and resolution framework, along with the appropriate tools for its effective implementation, for institutions offering Islamic financial services in a manner that is fully compliant with the Sharī‘ah principles. The foregoing primary objective of the Technical Note subsumes the following constituent objectives:
- To set out the essential measures to carry out effective recovery and resolution planning for all institutions offering Islamic financial services
- To support and enable effective resolvability assessments critical for the institutions offering Islamic financial services
- To ensure Sharī‘ah governance in relation to the recovery and resolution framework for institutions offering Islamic financial services
The Technical Note is primarily intended to facilitate the establishment of effective recovery and resolution frameworks for institutions offering Islamic financial services as part of the firm-level regulation of full-fledged (that is, separately incorporated) banks, including both domestic systemically important banks (D-SIBs) and non-DSIBs. The institutions offering Islamic financial services include, but are not limited to, commercial banks, investment banks, and other fund-mobilizing institutions, as determined by the respective supervisory and related authorities, that offer services in accordance with Sharī`ah rules and principles. The scope of the Technical Note on Recovery and Resolution also includes Islamic banking “windows” (either a branch or a dedicated unit), which are part of a conventional financial institution while providing financial services in a fully Sharī‘ah-compliant manner.
Comment Due Date: December 29, 2021
Keywords: International, Banking, Insurance, Securities, Islamic Finance, Islamic Banking, Resolution Framework, Recovery Planning, Key Attributes, FSB, Technical Note, D-SIBs, IFSB
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