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 markets 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.
Preparation and development of the IFSB standards
The IFSB formulates global prudential standards and guiding principles for adoption by IFSB member jurisdictions. The preparation of these standards follows a lengthy due process as outlined in the IFSB Guidelines and Procedures for the Preparation of Standards/Guidelines which involves, among others, the issuance of exposure drafts and, where necessary, the holding of public hearings. Since its inception, the IFSB has issued 38 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 are going through this due process; the standards are: Technical Note on Recovery and Resolution of IIFS [Institutions Offering Islamic Financial Services], Revised Shari’ah Governance Framework Standard, Core Principles for Islamic Finance Regulation (Takaful), Conduct of Business and its Prudential Supervision in Takaful, Revised Solvency Standard for Takaful/Retakaful Undertakings, Revised Guiding Principles on Corporate Governance for IIFS (Banking Segment), Technical Note on Shariah compliant Liquidity Management Tools, and Guidance Note on Deepening the Islamic Money Market.
The IFSB milestones in 2021
Despite entering into its second year against COVID-19 challenges, the IFSB continues to mark vital milestones to benefit its members and the Islamic financial services industry:
• Disseminated PSIFIs [Prudential and Structural Islamic Financial Indicators] data for the first (Q1) and fourth (Q4) quarters of 2021 for Islamic banking systems in member countries
• Disseminated PSIFIs data for Q1–Q4 2020 for the Takaful sector in member countries
• The IFSB’s PSIFIs database records the first dissemination of data on the Islamic capital market sector in member countries
• Disseminated PSIFIs data for Q4 2020 with detailed financial statements for Islamic banking systems in member countries
• Adopted two new standards for the Islamic financial services industry:
° IFSB-23: Revised Capital Adequacy Standard for Institutions offering Islamic Financial Services (IIFS) [Banking Segment], and
° IFSB-26: Core Principles for Islamic Finance Regulation (Financial Market Infrastructures).
• Jointly issued with the International Association of Deposit Insurers, new guidance in the form of Core Principles for Effective Islamic Deposit Insurance Systems
• The Central Bank of the UAE hosted the 39th IFSB Council Meeting and Capacity Building for Market Players in Abu Dhabi, and co-organized the 13th IFSB Public Lecture
• Organised the 15th IFSB Summit 2021 — ‘Balancing Innovation and Resilience’
• Admitted three new member organizations into its membership
• Signed an MoU with Bank Nizwa for collaboration on training and awareness-raising activities
• Published its fourth set of frequently asked questions (FAQs) on IFSB-12, IFSB-13, IFSB-24 and IFSB-25
• Organized an online executive program to divulge on managing digital transformation risks for Islamic financial institutions
• Issued four research papers in the Working Paper Series
• Launched the Ninth Edition of its Annual Flagship Publication: The Islamic Financial Services Industry Stability Report 2021
• Published the Russian version of three its standards
• Published the French version of five of its standards
• Issued the first edition of the Implementation Guidelines Report for 2020
• Successfully organized a series of joint seminars on the Islamic capital market with member organizations
• Jointly organized with Bank Indonesia the IFSB Conference 2021: Financial Stability in the Digital Era and its Implications for Islamic Economics and Finance
• Organized the 3rd Innovation Forum — Digital Transformation of the Islamic Finance Industry: Industry Case Studies, and
• Organized a members’ sharing session titled ‘Strengthening the Institutional and Market Infrastructure of Islamic finance — Implementation of Regulatory Standards and the Work Ahead’.
The IFSB remained resilient in 2020 in response to COVID-19 challenges and continued these efforts in 2021:
• Issued two new working papers on assessing the stability of Islamic banking amid COVID-19, and digital transformations in Islamic banking
• Issued a public statement addressing the measures to mitigate the impact of COVID-19 on the Takaful sector
• Disseminated regulatory and supervisory measures to mitigate the impact of COVID-19 and recommendations relating to the Takaful/re-Takaful industry
• Published the 12th Public Lecture to Focus on Post Pandemic Impact to Financial System Stability
• Organized the 2nd IFSB CEO’s Forum titled ‘Islamic Finance and Recovery Initiatives Post COVID-19’, and
• Regularly assesses the stability of the Islamic finance industry (post-pandemic and way ahead) with intensive discussions and sharing of country experiences in its council meeting.
The IFSB outlook: Strategic Performance Plan 2022–2024
The Council of the IFSB approved the new Strategic Performance Plan (SPP) 2022–2024 that aims to expand and strengthen the IFSB’s work plan in response to increasing aspirations and expectations of IFSB members, and to meet the demands in supporting the growth, resilience and stability of the Islamic financial services industry amid the evolving global financial industry challenges. The SPP 2022–2024 continues to focus on the following four strategic key result areas (SKRAs):
• SKRA 1 — Formulation and Issuance of Prudential Standards, Research and Statistics
• SKRA 2 — Facilitating the Implementation of Prudential Standards and Capacity Development
• SKRA 3 — Increasing Value in the IFSB Membership, Global Visibility and Attractiveness, and
• SKRA 4 — Efficient Management of Resources with Good Corporate Governance Practices.
Dr Bello Lawal Danbatta is the secretary-general of the IFSB.