The IFSB is an international standard-setting organization which was officially inaugurated on the 3rd November 2002 and started operations on the 10th March 2003. It serves as an international standard-setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include Islamic banking, Islamic capital market and Takaful. In advancing this mission, the IFSB promotes the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing international standards consistent with Shariah principles, and recommend them for adoption.
The IFSB membership
The IFSB has a diverse and unique membership of international, regional and national organizations and market players who share its objectives. The members of the IFSB consist of regulatory and supervisory authorities, industry associations, international intergovernmental organizations and market players.
This broad mix of stakeholders is the key strength of the organization and strengthens its ability to deliver quality standards and services to the industry. The diversity of experiences and viewpoints within the membership base (particularly on regulatory issues and concerns) is further promoted by collaboration and participation in various platforms organized by the IFSB, allowing the members to collaboratively promote the soundness and stability of the Islamic financial services industry.
As at December 2020, the IFSB have 188 members that comprised of 79 regulatory and supervisory authorities, nine international inter-governmental organizations, and 100 market players (financial institutions, professional firms, industry associations and stock exchanges) operating in 57 jurisdictions.
Preparation and development of the IFSB standards
The IFSB formulates global prudential standards and guiding principles for adoption by the IFSB member jurisdictions. The preparation of these standards follows a quality driven lengthy due. Since its inception, the IFSB has issued 34 standards, guiding principles and technical notes for the Islamic financial services industry.
Standards under development
The formulation of the IFSB standards and guidelines adhere to a rigorous due process. A number of standards going through this due process to be completed soon are: Technical Note on Recovery and Resolution of IIFS, Revised Shariah Governance Framework Standard, Core Principles for Islamic Finance Regulation (Takaful), Revised Capital Adequacy Standard for Institutions Offering Islamic Banking Services (RCAS), Core Principles for Islamic Finance Regulation [Financial Market Infrastructures], and IADI-IFSB Core Principles for Effective Islamic Deposit Insurance Systems (CPIDIS).
Knowledge sharing and research
The IFSB publishes working papers, reports and proceedings to contribute to efforts in knowledge sharing among industry stakeholders. This is in line with Article 4(g) of the Articles of Agreement “to undertake research into, and publish studies and surveys on, the Islamic financial services industry”. The IFSB’s landmark publication is the Islamic Financial Services Industry Stability Report, published annually since 2013. To date the IFSB has issued 14 working papers on issues related to the Islamic financial services industry.
• The Financial Stability Board (FSB) included the IFSB’s Core Principles for Islamic Finance Regulation (Banking Segment) into the Compendium of Standards;
• The IFSB and Arab Monetary Fund renewed their MoU to support the development of the Islamic finance among member countries;
• The IFSB admitted seven organizations into its membership;
• The IFSB published the French version of three IFSB Standards on the Core Principles for Islamic Finance Regulation (Banking Segment) (IFSB-17), Guiding Principles for ReTakaful (Islamic Reinsurance) (IFSB-18) and Guiding Principles on Disclosure Requirements for Islamic Capital Market Products (Sukuk and Islamic Collective Investment Schemes) (IFSB-19);
• The IFSB issued the eighth edition of its annual flagship publication: the Islamic Financial Services Industry (IFSI) Stability Report 2020;
• The IFSB and the IsDB signed a Technical Assistance Grant Agreement for the final review of the 10-Year Framework and Strategy Project for the Islamic Financial Services Industry;
• The IFSB Prudential and Structural Islamic Financial Indicators (PSIFIs) database achieved a new milestone with the dissemination of data on the Takaful sector;
• The IFSB published frequently asked questions for Standards on Corporate Governance (IFSB-3), Governance for Islamic Collective Investment Schemes (IFSB-6), Risk Management for Takaful Undertakings (IFBS-14) and Financial inclusion (TN-3);
• The IFSB and Bahrain Institute of Banking and Finance renewed their MoU to enhance the stability of the Islamic financial services industry; and
• The IFSB Council adopted two new standards for the Islamic financial services industry
The IFSB continued its commitment and support to all member organizations, and achieved the following milestones in response to the spread of the coronavirus disease (COVID-19):
• The introduction of virtual formats for all workshops, technical meetings and other activities;
• The IFSB successfully connected its 2020 annual meeting virtually;
• The IFSB conducted online seminars, capacity building and executive programs on COVID-19 and its implications on institutions offering Islamic financial services in addition to all scheduled workshops activities;
• The IFSB issued public statements addressing the implications of COVID-19 on aspects of Islamic banking and Islamic capital markets;
• The IFSB issued a compendium of financial sector regulatory responses to COVID-19;
• The IFSB organized the online Regulatory and Supervisory Authorities (RSA) Forum on COVID-19;
• The IFSB launched the Islamic Financial Services Industry Stability Report 2020 and hold the Members and Industry Engagement Session virtually;
• The IFSB organized its first CEO’s Forum on COVID-19 and Its Implications on Institutions offering Islamic Financial Services;
• The secretariat also organized an Extraordinary Technical Committee meeting to ensure technical projects are not interrupted;
• The IFSB provided free full unlimited access to the IFSB e-learning modules for all membership categories for staff of member institutions in order build capacity based on published IFSB standards; and
• The IFSB’s 2nd Innovation Forum discussed ‘Digital Transformation of Islamic Finance and other Innovative Solutions for Post-COVID-19 Recovery’.
Our future plans
The IFSB will continue focusing on the IFSB mission of providing unparalleled support for its member organizations and strengthen its engagements and benefits. An in-depth deeper analysis of the COVID-19 implications, emerging risks related to accelerated technological transformation and other vulnerabilities that may potentially affect the financial stability, resilience and soundness of the global Islamic financial system will be our top priority in 2021 and beyond. The IFSB Secretariat aims to increase its global visibility and collaboration with all stakeholders and international counterparts.
Dr Bello Lawal Danbatta is the secretary-general of the IFSB.