ISLAMIC FINANCIAL SERVICES BOARD

ISLAMIC FINANCIAL SERVICES BOARD
MEMBERS UPDATE
~
IFSB MEMBERSHIP UPDATE
IFSB membership
has increased to 94 members (five members admitted in March 2006 and six members
admitted in August 2006). The membership
with
the
International
Development
Monetary
Fund,
list now includes 22 regulatory and supervisory bodies, together
The
Bank and Islamic Development
World
Bank,
Bank
for
International
Settlements,
Bank, as well as 67 financial institutions
Asian
from 17 countries.
The newly admitted members are:
Associate Members
Qatar Financial Centre Regulatory Authority (Qatar) and Malaysia Deposit Insurance Corporation
Observer Members
Ahli United Bank (Bahrain),
Insurance
Perbadanan
Co. Plc. (Jordan),
(Kuwait),
The Securities
Tabung Amanah
First Investment
House
Company
Kuwait (Kuwait),
AI Baraka
House (M) Berhad (Malaysia) and Industrial Development
The Council
of the IFSB has amended
supervisory authorities
available to:
i) Supervisory
authorities
ii) Inter-governmental
its Articles
responsible
organizations
Islamic
Bank Lebanon
of Agreement
for the supervision
that recognizes
The Islamic
Osoul Leasing and Finance Company
(Lebanon),
Kuwait Finance
Bank of Sudan (Sudan).
to join the IFSB as Full Members.
industry of each sovereign
established practice, and
Islam Brunei (Brunei Darussalam),
(Kuwait),
(Malaysia)
to enable
insurance
With this amendment,
of banking, securities
financial
services,
and securities
Full Membership
and insurance
whether
is now
or takaful
by legislation
or by
that have an
explicit mandate for promoting Islamic finance
markets.
of /FSB members on page 4.
View full/ist
AWARENESS PROGRAMS
3rd
IFSB Summit
17 -18 May 2006· Beirut, Lebanon
The 3'd IFSB Summit was held under the theme of
"Aligning the Architecture
a
of Islamic Finance to the
Evolving Industry Needs" organised by the IFSB
and hosted by Banque du Liban. The President of
the Council of Ministers, His Excellency
8th
Meeting of the Council ofthelFSB,
Kuwait City, March 2006
Mr. Fuad
Siniora delivered the opening address, followed by
the
presentation
speakers.
from 24 countries,
players
of
26
papers
by
renowned
The Summit attracted 250 participants
and
commitment
comprising
academicians.
towards
the
regulators,
In
a
of
of
the
development
Islamic
financial
delegates
agreed that the 10-year Framework
the Development
commitment
authorities
services
market
show
industry
(IFSI),
for
of the IFSI requires a stronger
from
regulatory
to support
and
supervisory
its implementation
through
national
Master
plans.
Several
speakers
highlighted the need for increased efforts towards
establishing
the
necessary
infrastructure
to
promote the soundness
and stability of the IFSI,
such as the development
of adequate instruments
and mechanisms for inter-bank money market and
lenders of last resort as well as an enhanced
disclosure
regime for Islamic financial institutions
compatible to internationally
recognized standards
in order to reinforce public confidence.
It was also
mentioned that the implementation of globally
recognized
standards
would
also assist
Islamic
financial institutions gain competitive edge.
... Continued
..&.a..
3rt!
IFSB Summit, Beirut, May 2006
on page 3
Page I
PREPARATION OF PRUDENTIAL STANDARDS & RELATED ACTIVITIES
EXPOSURE
DRAFT ON CORPORA TE GOVERNANCE
Following the Technical Committee's
STANDARD
(TC) approval to issue the Exposure Draft of the Corporate Governance
Standard (ED3) for public consultation
in
its meeting on 20 December 2005 in Jeddah, Saudi Arabia, the ED3 has undergone a 5-month exposure period, which ended on 2 June 2006. During
the exposure period, the IFSB held two public hearings, one in Beirut, Lebanon (16 May 2006), and another in Jakarta, Indonesia (2 June 2006) as well
as a workshop in Kuala Lumpur, Malaysia (26 May 2006). The Corporate Governance Working Group held its 7th meeting in August 2006 to deliberate on
the comments
Advisory
that were received on ED3. Following the TC meeting on 31 August 2006 in Dubai, the ED3 was approved to be tabled to the Shari'ah
Committee
of the Islamic Development
Bank in September
meeting on 28 November 2006, before recommending
Saudi Arabia as the third IFSB Standard.
2006. The finalized
ED3 is expected
its adoption by the IFSB Council in its forthcoming
to be tabled to the TC in its forthcoming
meeting on 29 November
2006 in Jeddah,
SUPERVISORY REVIEW PROCESS WORKING GROUP (SRPWG) AND TRANSPARENCY & MARKET DISCIPLINE WORKING GROUP (TMDWG)
Both the SRPWG and TMDWG had convened three times in Langkawi, Washington
and Singapore, since their last meeting in Luxembourg in November
2005. The proposed draft of the SRP and TMD were deliberated by the TC in its meetings in Langkawi (February 2006) and Dubai (August 2006). The
Shari' ah Advisory Committee of the Islamic Development Bank will review the compliance of the drafts with Shari'ah rules and principles in its
forthcoming
meeting in September
2006 in Makkah, Saudi Arabia before tabling them to the TC in its forthcoming
meeting in November
2006, for
consent to issue them as Exposure Drafts.
GOVERNANCE
FUNDS WORKING GROUP (GIIFWG) & SPECIAL ISSUES IN CAPITAL ADEQUACY
OF ISLAMIC INVESTMENTS
WORKING
GROUP (SCAWG)
The initial working group (WG) meetings for the GIIFWG and the SCAWG, were held in March 2006 in Kuwait to identify their relevant scope of work.
This was followed by their second meetings in Singapore to discuss the initial studies. In August 2006, both WGs held their third meetings in Bandar Seri
Begawan,
Brunei Darussalam
where the GIIFWG meeting discussed the development
of a fact-finding
survey on Islamic investment funds, while the
SCAWG meeting deliberated over a roundtable discussion on real estate issues in institutions offering Islamic financial services (IIFS).
CORPORA TE GOVERNANCE
OF TAKAFUL OPERA TlONS WORKING GROUP
In its 7th meeting held on 21 December 2005, the Council approved the establishment of a working group to draft a standard on Corporate Governance of
Takaful Operations, which held its first meeting in September 2006 in Kuala Lumpur, Malaysia to identify its relevant scope of work. The establishment of
this working group resulted from the 1st IFSB Seminar on the Regulation of Takaful held in Jordan in January 2005, which was jointly organized by the
IFSB and the Insurance Commission of Jordan. The seminar concluded that:
The IFSB should play an active and complementary
role to that of the International
Association
of Insurance
Supervisors
(IAIS) by issuing
prudential and supervisory standards for Takaful to safeguard consumer interests and promote the soundness and stability of the financial system
as a whole.
•
The priority of these efforts should be given to specific and immediate regulatory issues that require harmonization
The IFSB and the IAIS were encouraged
across the Takaful industry.
to establish a joint working group to produce an issues paper on the applicability
of the existing IAIS
core principles to the regulatory and supervisory standards for Takaful, and which would later be developed by the IFSB.
The Joint Working Group (JWG) was established to discuss an initial study on the existing prudential gaps in the IAIS Insurance Core Principles (ICP) in
respect of Takaful. An Issues Paper was produced and presented to the IAIS Technical Committee in October 2005, which identified issues under four
major themes: a) corporate governance;
b) financial and prudential regulation; c) transparency,
reporting and market conduct; and d) supervisory review
process with the conclusion that these issues should be addressed in an integrated manner. It also identified corporate governance standard in Takaful
as a priority area, as it embraces the industry's fundamental issues such as acceptable Takaful models and their essential parameters, the relationship
between policyholders'
and shareholders'
funds, Shari'ah
own right, but their resolution is fundamental
PRUDENTIAL
governance,
among others. These are substantial
regulatory and supervisory
issues in their
for progress in other areas.
ISLAMIC FINANCE DA TA BA SE TASK FORCE (DA TA BA SE TASK FORCE)
The Draft Compilation
Guide on Prudential
supervisory
and international
authorities
and Structural
organizations
Islamic Finance
Indicators
(Draft Compilation
which are members of the IFSB for their comments
Guide) was sent on 24 July 2006 to all
as part of the public consultation.
meeting of the Database Task Force was held on 23 August 2006 in Karachi, Pakistan to (a) broadly review the Draft Compilation
The final
Guide; (b) to discuss
at length any issues arising from the comments; and (c) reach a consensus on how to address them. The revised Draft Compilation Guide was presented
to the TC in August 2006 for further discussion
Arabia.
before finally adopting it in its forthcoming
meeting on 29 November 2006 in Jeddah, Kingdom of Saudi
ISLAMIC MONEY MARKET TASK FORCE (MONEY MARKET TASK FORCE)
The establishment
of this Money Market Task Force is to facilitate the development
assist their integration
into the national financial systems and eventually
of domestic
Islamic money markets as well as to encourage
into the broader international
Langkawi (February 2006) to discuss, among other things, its objectives, scope of work, deliverables
(May 2006), the Task Force reviewed a questionnaire
central banks) and liquidity management
market and foreign exchange
and
system. The Task Force held its 1st meeting in
and detailed action plan. In its 2nd meeting in Beirut
for a survey on Shari'ah compliant practices, instruments
and markets for monetary operations (of
(of IIFS). The findings of the survey will assist the Task Force to draft a technical study report on Islamic money
market, which will represent a consensus on approaches
instruments for monetary operations and liquidity management
of how to best design Shari'ah compatible
short-term financial
as well as strategies to develop an Islamic money market and its related infrastructure,
as
well as institutional, structural and operational arrangements.
10- YEAR FRAMEWORK
FOR THE DEVELOPMENT
OF IFSI
In its 8th meeting on 27 March 2006 in Kuwait, the Council approved the request by the Islamic Development
Institute (IDB/lRTI) to provide additional opportunity
(the Framework),
for the IFSI stakeholders
of IFSI
The Drafting Committee met on 17 August 2006 in Kuala Lumpur to review the comments received from regulators and market players
and revise the Framework accordingly. The revised Framework
November 2006 in Jeddah, Saudi Arabia.
Page 2
Bank I Islamic Research and Training
to comment on the Draft 10-Year Framework for the Development
will be submitted
to the IFSB Council for adoption in its forthcoming
meeting on 29
ISLAMIC FINANCIAL SERVICES BOARD
AWARENESS PROGRAMS
2nd International Conference on Islamic Banking: Risk Management, Regulation and Supervision
7 - 8 February 2006 • Kuala Lumpur, Malaysia
The Conference, hosted by Bank Negara Malaysia, was jointly organised by the IFSB and IDB/lRTI. The objectives of the Conference were to:
•
take stock of the relevance of IIFS for financial and banking stability,
analyze and study the unique risks of IIFS, and
inculcate risk management
culture among
Fourteen papers were presented throughout
IIFS.
the conference
and deliberations
brought up interesting ideas for further development
of the industry, in
particular new research areas, financial tools and practices. The Conference was attended by 161 participants.
2nd Seminar on the Regulation of Takaful
23 - 24 February 2006 • Langkawi, Malaysia
The Seminar,
held in Langkawi,
Malaysia, was attended
by 109 participants.
Fifteen papers were presented
addressing
Takaful
related issues,
including:
International Association of Insurance Supervisors Core Principles and their implications for the industry
•
Corporate governance and transparency
Investments undertaken by Takaful companies under different regulatory regimes
•
Unresolved Fiqh issues in the industry
•
Regulatory impediments faced by Takaful market players for the industry
A majority of the participants
echoed the need for standards
on Takaful in particular those related to corporate
governance
and transparency
for
consumer protection. The Seminar was hosted by Bank Negara Malaysia.
Workshop on Rating Assessment Issues for Institutions
Services
21 February 2006 • Langkawi, Malaysia
Offering Islamic Financial
The Workshop was organised in response to issues arising from the Capital Adequacy Standard
Working Group Meetings. The objectives of the Workshop were to:
•
identify various types of equities/liabilities of IIFS' balance sheets and define the obligations
•
and rights of parties involved in such transactions;
discuss what constitutes default for each type of the above sources of funds including
discussions
on the difference between contractual obligations and economic loss as well
as on losses of providers of funds to IIFS due to liquidity issues vs. losses due to erosion of
•
capital;
discuss the relevance of the degree of Shari'ah compliance while assigning a rating to an
IIFS;
•
discuss the meaning of credit ratings of IIFS;
•
discuss whether credit ratings of IIFS should be conducted on a separate rating scale to be
•
specifically identified; and
discuss the securitization of Islamic asset products and their ratings
The
Workshop
was
representatives
discussion.
well
received,
with
from all major international
the
participation
rating agencies,
of
70
individuals
who also presented
including
papers for
Seminar on Legal Issues in the Islamic Financial Services Industry
14 -15 March 2006 - London, United Kingdom
2nd
The Seminar focused on two legal issues of immediate
insolvency, which are becoming increasingly
relevance to the IFSI, namely sukuk and
important for the future of Islamic finance in general
and treasury operations of IIFS in particular. The Seminar highlighted, among others, legal
issues which need to be addressed, understood and positioned correctly to cater for the
specificities of Islamic Finance. The Seminar, supported by the lOB and Asian Development
Bank, attracted 76 participants, during which 17 papers were presented.
International Seminar on Challenges Facing the Islamic Financial Services Industry:
"Unresolved Fiqh Issues Relating to Regulation and Supervision of the Islamic Financial
Services Industry"
28· 29 March 2006 - Kuwait City, Kuwait
3rd
The above Seminar was jointly organised with the IDB/lRTI and hosted by the Central Bank of
Kuwait. Eight papers were presented discussing on the continued fiqh debate on the use of swap
and hedging as risk mitigation tools in Islamic finance, as well as Shari'ah challenges in
implementing IFSB standards. The Seminar enabled the participants to gain an insight into the
fiqh reasoning and methodologies underlying some of the controversial innovations in Islamic
finance.
Seminar on Challenges and Opportunities in Islamic Finance
24 April 2006 - Washington D.C., Unit~d Stat~s of Am~riea
Jointly organized
the significant
by the World Bank and the IFSB, the Seminar aimed to create awareness
need for cross-sectoral
approach to supervision
of
in the Islamic financial services
industry. Nine papers were presented at the Seminar, which was attended by 35 participants.
Page 3
ISLAMIC FINANCIAL SERVICES BOARD
MEMBERSHIP LIST
[as at SaptmnLw 2006]
FULL MEMBERS (16)
Central Bank of Bahrain
Bangladesh Bank
Central Bank of Egypt
Central Bank of the Islamic Republic of Iran
Central Bank of Jordan
Ministry of Finance, Brunei
Bank Indonesia
Islamic Development Bank
Central Bank of Kuwait
State Bank of Pakistan
Saudi Arabian Monetary Agency
Bank of Sudan
Bank Negara Malaysia
Qatar Central Bank
Monetary Authority of Singapore
Central Bank of the United Arab Emirates
ASSOCIATE MEMBERS (9)
International Monetary Fund
Bank for International Settlements
The People's Bank of China
Malaysia Deposit Insurance Corporation
Qatar Financial Centre Regulatory Authority
World Bank
Dubai Financial Services Authority
Banque du Liban
Bangko Sentral ng Pilipinas
OBSERVER MEMBERS (69)
Asian Development Bank
BAHRAIN
AI Amin Bank
Albaraka Banking Group
Ahli United Bank
Arcapita Bank
Bahrain Islamic Bank
BNP Paribas Islamic Banking Unit
Kuwait Finance House
Noriba Bank
Unicorn Investment Bank
BANGLADESH
islamic Bank Bangladesh Limited
BRUNEIDARUSSALAM
Bank Islam Brunei Darussalam Berhad
Perbadanan Tabung Amanah Islam Brunei
EGYPT
Egyptian Saudi Finance Bank
Faisallslamic Bank
IRAN
Bank Keshavarzi
Bank Saderat Iran
JORDAN
The Islamic Insurance Co. Plc
Jordan Islamic Bank for Finance and Investment
KUWAIT
A'ayan Leasing & Investment Co.
AI-Muthanna Investment Company
Boubyan Bank
First Investment Company Kuwait
Gulf Investment House
Investment Dar
Kuwait Finance House
Osoul Leasing and Finance Company
The Securities House Kuwait
LEBANON
AI Baraka Bank Lebanon
MALAYSIA
Affin Bank Berhad
Am Bank Berhad
Bank
Bank
Bank
CIMB
Page 4
Islam Malaysia Berhad
Kerjasama Rakyat Berhad
Muamalat Malaysia Berhad
Islamic
Enquiries
on IFSB membership,
Hong Leong Islamic Bank
Labuan Offshore Financial Services Authority, Labuan
Kuwait Finance House (M) Berhad
Malaysian Rating Corporation Berhad
RHB Islamic Bank Berhad
Rusd Investment Bank, Labuan
PALESTINE
Arab Islamic Bank
QATAR
Alsafa Islamic Banking, Commercial Bank of Qatar
Qatar International Islamic Bank
Qatar Islamic Bank
Qatar National Bank
SAUDI ARABIA
AI-Jazira Bank
AI-Rajhi Banking & Investment Corporation
Islamic Corporation for the Insurance of Investment and
Export Credit
National Commercial Bank
Saudi British Bank
SOUTH AFRICA
Oasis Crescent Capital (Pty) Ltd
SUDAN
Industrial Development Bank
Omdurman National Bank
Sudanese Banks Association
Sudan Financial Services Company
The National Pensions Fund
TU RKEY
Albaraka Turkish Finance House
Kuwait Turkish Evkaf Finance House
UNITED ARAB EMIRATES
Abu Dhabi Commercial Bank
Abu Dhabi Islamic Bank
Amlak Finance
Commercial Bank International
Dubai Bank
Dubai Islamic Bank
HSBC Amanah
National Bank of Dubai
Sharjah Islamic Bank
UNITED STATES OF AMERICA
Guidance Residential LLC
please contact Mrs Noor Emi Noordin
at [email protected]