CIBAFI Submitted its Comments to the Basel Committee on Banking Supervision (BCBS)

Manama, Kingdom of Bahrain | Aligned with its role as an advocate of the Islamic Financial Services Industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has submitted its comments on 14^th May 2018 to the Basel Committee on Banking Supervision (BCBS) on the Consultative Document on “Pillar 3 disclosure requirements – updated framework”.

The Consultative Document has been issued on 27^th February 2018 and was open for public consultation until 25^th May 2018.

CIBAFI thanked the BCBS for giving the opportunity to the Islamic Financial Services Industry to comment on the Consultative Document. CIBAFI has provided collective feedback of its member banks from over 33 jurisdictions, comprising the following key points:

First, the CD states in the scope of application that “Unless otherwise specified, all disclosure requirements proposed in this Consultative Document apply to internationally active banks at the top consolidated level……..”. This is of course consistent with the application of other parts of the Basel III framework, but many jurisdictions have applied that framework, or parts of it, more widely. In this case, some CIBAFI members indicate that, because of the sophistication and comprehensive nature of the information to be disclosed, it would not be appropriate for the full framework to be applied to all banks generally.

Second, in a number of places, the framework uses asset classes which are not appropriate to Islamic banking. This is particularly the case in “Standardised approach – exposures by asset classes and risk weights”. Whilst in some cases there may be ways of addressing this issue by entering zero values in some cells, and using options to create additional rows or columns, this may look strange in presentational terms and, more importantly, may lead to inconsistencies between banks doing comparable business. It would be better, therefore, to define a set of templates tailored to Islamic banks.

Third, under the heading “Credit risk” (part 2), the CD suggests additional qualitative and quantitative disclosures related to prudential treatment of problem assets, which are mandatory only when required by national supervisors. Some of our members have expressed the view that the qualitative disclosures in particular would involve too great an intrusion into commercial confidentiality, with possible impacts on banks’ competitive positions.

Fourth, under the heading “Asset encumbrance”, the CD requires disclosures by banks on encumbered and unencumbered assets. It requires these only in overall terms, but national supervisors have the discretion to require them to be broken down by asset class. Some CIBAFI members highlighted that the nature of Islamic banks’ transactions and activities will typically be different from those of conventional banks, and thus the application of the same classes may not be appropriate. In addition, members were concerned that the column relating to central bank facilities might be too sensitive, especially in times of stress. CIBAFI therefore suggests that the option to require this column should be deleted.

In addition to policy and regulatory advocacy, CIBAFI continues to support the Islamic Financial Services Industry through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive training programmes.

-Ends-

About the General Council for Islamic Banks and Financial Institutions (CIBAFI)

CIBAFI is an international organization established in 2001 and Headquartered in the Kingdom of Bahrain. CIBAFI is affiliated with the Organization of Islamic Cooperation (OIC). CIBAFI represents the Islamic financial services industry globally, defending and promoting its role, consolidating co-operation among its members, and with other institutions with similar interests and objectives. With over 120 members from 33 jurisdictions, representing market players, international intergovernmental organizations and professional firms, and industry associations.

For more information about CIBAFI, please visit www.CIBAFI.org

Tel: +973 17357300 Email: media@cibafi.org