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The IFSB Welcomes IMF Executive Board's Decision to Formally Recognise Islamic Finance principles.

5/29/2018 12:00:00 AM   |      |   

The IFSB Welcomes IMF Executive Board's Decision to Formally Recognize Islamic Finance principles for Banking in its Surveillance Program.

The Secretary-General of the IFSB, Dr. Bello Lawal Danbatta remarked, “The IFSB welcomes the IMF Executive Board’s recent endorsement of the IFSB CPIFR for the banking sector and associated assessment methodology as a part of its surveillance program for the banking sector globally. Similarly, the IFSB remains ready to support the Executive Board's call for stronger efforts to strengthen the regulatory and supervisory frameworks to promote financial stability and sound development in countries where Islamic banking services are being offered, as highlighted in detail in the recent IMF Policy Paper on this subject.”

Dr. Danbatta further added, “The IMF Executive Board's statement reflects the high-level emphasis and efforts undertaken here at the IFSB in response to international developments with a series of next-generation prudential standards and guiding principles that align global regulatory frameworks with the specificities of Islamic finance. Our work program in recent years and years to come placed high priority on developing standards that placed emphasis on higher and better quality capital and liquidity buffers in institution offering Islamic financial services (IIFS), and an increased focus on supervisory review process, macro prudential regulation and stress testing exercises – while being complementary to the standards issued by the Basel Committee on Banking Supervision (BCBS), the International Organization of Securities Commissions (IOSCO), and the International Association of Insurance Supervisors (IAIS).”

Dr. Danbatta also commented, “The IFSB remains committed to maintaining close cooperation between the IFSB and the IMF/World Bank as well other international standard setters for conventional sector, including the BCBS, to ensure respective standards on conventional and Islamic finance remain consistent. Our CPIFR initiative is proceeding with the coverage of Islamic capital market and deposit insurance sector during 2018 and Islamic insurance (Takāful) sector in the coming years.” “The IFSB will continue assisting the regulatory and supervisory authorities in its member jurisdictions in the implementation of IFSB Standards through its comprehensive set of initiatives involving workshops, technical assistance, policy advice and e-learning platform.” He added, “We are taking steps to further strengthen our implementation program by adding the dimension of consistency and impact assessment of the implemented standards.”

The IMF's Executive Board highlighted that the CPIFR will complement the international architecture for financial stability, while providing incentives for improving the prudential framework for Islamic banking industry across jurisdictions. Similarly, the CPIFR will be relevant for macro-financial approach to supervisory standards assessments undertaken by the IMF and the World Bank. The statement also reveals that “jurisdictions might need assistance to enhance their capabilities to identify and monitor emerging risks, to understand the linkages that might exist with other sectors, and to ensure effective supervision with a risk-based approach, which involves a systemic and macro prudential dimension.”

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