IFSB produces new Islamic banking guidelines

The Islamic Financial Services Board (IFSB), one of the main standard-setting bodies for Islamic finance has introduced new guidelines for the industry.

The Kuala Lumpur based firm published the guidance on capital adequacy for Islamic banks and risk management of Islamic insurance, known as takaful.

The IFSB released previous guidance relating to capital adequacy in 2005 and 2009 based on Basel II standards, but the introduction of Basel III standards, which will be phased in over the coming years, has led to the new guidance.

Revised guidelines detail the criteria for using Islamic bonds, known as sukuk, as Tier 1 and Tier 2 regulatory capital, a practice that has been in operation this year in financial institutions in the United Arab Emirates and Turkey.

Guidelines for takaful firms outline issues faced by Islamic insurers, including the risk that their products become non-compliant with sharia principles, and lays out best practice when it comes to supervising funds and disclosing information.

*This article by Tony Aynsley was published on 13 December 2013 by Bobsguide.com. Read the original article here.

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