The Islamic Financial Services Board (IFSB) published a set of frequently asked questions (FAQs) that provide additional guidance on four IFSB standards. These standards are IFSB-12 on guiding principles on liquidity risk management for institutions offering Islamic financial services, IFSB-13 on guiding principles on stress testing for institutions offering Islamic financial services, IFSB-24 on guiding principles for investor protection in Islamic capital markets, and IFSB-25 on disclosures to promote transparency and market discipline for takāful/retakāful undertakings. The new set of FAQs offers clarifications and explanative directions on the issued standards.
The FAQs for IFSB-12 give explanation and guide about the main principles in the effective management of liquidity risk in institutions offering Islamic financial services. These include identification and measuring liquidity risk and the role of the top management and supervisors of an institution. The questions also address the key factors in controlling and mitigating liquidity risk and how to report and disclose this risk. In addition, the FAQs provide clarifications related to liquidity risk management at the consolidated level, along with the home-host and cross-sector supervision for liquidity risk. The FAQs for IFSB-13 include responses to questions raised about IFSB-13, including questions regarding the differences between scenario analysis and sensitivity tests, the role of Supervisory Sharīʻah Board in stress testing framework, stress testing related to capital planning, and model and parameter risks posed by using models for stress testing.
Keywords: International, Banking, Insurance, Securities, FAQ, Islamic Finance, Liquidity Risk, Stress Testing, Regulatory Capital, IFSB
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