* IFSB to release an updated t10-year framework for Islamic
* To outline benchmarks to better track industry progress
* Working on standards for Islamic reinsurance and capital
* Also plans guidance for stress testing and liquidity
By Bernardo Vizcaino
May 13 The Islamic Financial Services Board
(IFSB) will release an updated 10-year industry roadmap next
week as it places greater emphasis on the implementation of its
standards with regulators around the globe.
Guidelines from Kuala Lumpur-based IFSB, one of the main
standard-setting bodies for Islamic finance, are gaining
prominence as the industry takes a greater share of the banking
sector in some Muslim-majority countries and makes inroads in
The IFSB will release a Mid-Term Review (MTR) of the
industry's 10-year framework document on May 19, outlining
benchmarks to monitor industry progress in a more focused way,
IFSB secretary-general Jaseem Ahmed told Reuters.
The original framework, released in 2007 by the IFSB and the
research arm of the Jeddah-based Islamic Development Bank
, identified 16 recommendations for policymakers but
did not spell out detailed metrics to track their progress.
"The MTR proposes a stronger implementation plan. This plan
includes concrete initiatives - to be undertaken by a range of
stakeholders - to bring the recommendations to life."
Founded in 2002, the IFSB's initial efforts have focused on
winning a wide membership base, leaving implementation and
enforcement to national regulators to decide, a decision driven
in part by their diverse legal and regulatory backgrounds.
Now, however, the 184-member IFSB hopes to draw up more
concrete steps for regulators while still leaving some
flexibility given the wide range of industry development.
"A roadmap can be very helpful to national authorities, and
the national industry, but in practice quite a few years of
experience is needed before it becomes practical to develop an
Over the last decade, the IFSB has issued 22 standards and
guidelines and now plans to develop new standards for Islamic
reinsurance (retakaful) and capital markets, said Ahmed ahead of
the IFSB's annual summit to be held in Mauritius next week.
"The greatest need is to bring takaful and capital markets
to a state of comparability, from the regulatory perspective,
with the banking sector. So these are two areas where we are
gearing up for additional issues."
A working group to study a standard for retakaful has now
been launched and another working group will soon be set up to
study a standard for capital markets, Ahmed said.
"This is an important initiative to facilitate the
integration of Islamic finance into the global economy by
bringing it within the global surveillance mechanism of the
International Monetary Fund and the World Bank."
In the past two years, the IFSB has issued separate
guidelines on liquidity risk management, stress testing and
capital adequacy, with further guidance in the pipeline.
The IFSB has now begun work on a technical note on stress
testing and it has also conducted a study on liquidity issues to
help shape a guidance note.
The latter would take up the challenges posed to Islamic
banks by the liquidity coverage ratio and net stable funding
ratio introduced by the Basel III framework, said Ahmed.
Islamic finance has its core markets in the Middle East and
Southeast Asia, but its expansion into new jurisdictions has
meant the IFSB is increasingly in touch with regulators in
Africa, Asia and Europe.
"Implementation is picking up as the market grows. We see a
clear pick up in implementation once the market becomes larger
than 5 percent of the total of the respective financial sector."
Countries like Senegal, Gambia, Nigeria and South Africa
have taken steps to develop the industry, while detailed
regulatory frameworks have emerged in others, said Ahmed.
"Oman and Kazakhstan are two examples of new markets in
which policy-makers have benefited from the experiences of
Over the past year, the IFSB has engaged with regulators in
Nigeria, Sudan, Hong Kong, Bangladesh, Afghanistan and Libya;
It held regional sessions at the Asian Development Bank and in
Oman for the Gulf region. Its last European forum was hosted by
Italy's central bank.
"We are now preparing capacity and awareness building to be
undertaken in Central Asia and in West Africa," Ahmed said.
In March, South Korea's central bank became a member of the
IFSB, joining the likes of the central banks of Luxembourg and
Japan and the monetary authorities of Hong Kong and Singapore.
(Editing by Kim Coghill)