The IFSB Council Adopts Core Principles for Islamic Finance Regulation (IFSB-17)

Jakarta, 2 April 2015

In its 26^th Meeting, held in Jakarta, Indonesia today, the Council of the Islamic Financial Services Board (IFSB) resolved to approve the adoption of a new Standard on Core Principles for Islamic Finance Regulation (Banking Segment) (IFSB-17).

The 26^th meeting of the IFSB Council, hosted by Bank Indonesia, was chaired by the Governor, Bank Indonesia, and IFSB Chairman for 2015, H.E. Agus D.W. Martowardojo. It was attended by seven central bank governors and heads of regulatory and supervisory authorities, as well as 13 senior representatives from among the Council and Full members of the IFSB, representing 17 countries. The meeting was also attended by the President of the Islamic Development Bank.

IFSB-17: Core Principles for Islamic Finance Regulation (Banking Segment)

Core Principles for various financial sectors have become a standard tool to guide regulators and supervisors in developing their regulatory regimes and practices. They also serve as a basis for assessing the strength and effectiveness of regulation and supervision by either the regulatory and supervisory authorities themselves or by the external parties such as the International Monetary Fund and World Bank under their Financial Sector Assessment Programme (FSAP).

The main objective of IFSB-17 is to provide a set of Core Principles - along with associated assessment methodology - for the regulation and supervision of the Islamic financial services industry (IFSI), taking into consideration the specificities of the institutions offering Islamic financial services (IIFS) in the banking segment, the lessons learned from the financial crisis, and complementing the existing international standards, principally the Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision.

It is envisaged that these Core Principles will be used by jurisdictions as a benchmark for assessing the quality of their regulatory and supervisory systems and for identifying future work to achieve a baseline level of sound regulations and practices for Islamic finance. The IFSB-17 aims to promote further integration of Islamic finance with the international architecture for financial stability, while simultaneously providing incentives for improving the prudential framework for Islamic finance across jurisdictions so that it is harmonised and consistently implemented across the globe.

IFSB-17 will also facilitate the work of those supervisory authorities that are new to the regulation and supervision of IIFS and face challenges in identifying applicable principles and benchmarks for assessing the gaps in their existing policies and regulations, while addressing the specificities of Islamic finance. The differences in the operational and Shariah characteristics of Islamic finance products in various jurisdictions highlight the need for standardisation of the prudential supervision framework at the international level, which will be facilitated by the issuance of IFSB-17.

In the same meeting, the Council also approved the adoption of a Guidance Note on Quantitative Measures for Liquidity Risk Management in Institutions Offering Islamic Financial Services (Excluding Islamic Insurance (Takaful) Institutions and Islamic Collective Investment Schemes) or GN-6.

The softcopies of IFSB-17 and GN-6 will be available on the IFSB website, www.ifsb.org in both English and Arabic languages in due course.

The Meeting of the Council was followed by the 13^th IFSB General Assembly and the 11^th Islamic Financial Stability Forum.

-Ends-

About the Islamic Financial Services Board (IFSB)
The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry-related issues, as well as organises roundtables, seminars and conferences for regulators and industry stakeholders. Towards this end, the IFSB works closely with relevant international, regional and national organisations, research/educational institutions and market players.

The members of the IFSB comprise regulatory and supervisory authorities, international inter-governmental organisations and market players, professional firms and industry associations.

For more information about the IFSB, please visit www.ifsb.org.

© Press Release 2015