Wednesday 30, May 2018 by William Mullally

CIBAFI submits comments to IFSB on latest exposure draft

CIBAFI submitted three key points as part of its comments to the IFSB. 

The General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, has submitted its comments the Islamic Financial Services Board (IFSB) on the Exposure Draft no: 22  “Revised Standard on Disclosures to Promote Transparency and Market Discipline for Institutions Offering Islamic Financial Services [Banking Segment]”. The comments were submitted on 27 May, two months after the exposure draft was issued on 28 March. It was open for public consultation until 28 May.

CIBAFI submitted three key points as part of its comments to the IFSB.

“Firstly, certain disclosure templates provide a set of exposures based on different types of contracts and assets while mentioning only Ijarah, Istisna, Mudarabah, Musharakah and Murabahah. However, the ED indicates that the “IIFS may modify the breakdown and order of rows in the template if a different breakdown would be more appropriate in reflecting their activities”, thus the breakdown shall reflect all types of contracts that might be used in securitisation. The ED should also provide for the treatment of hybrid securitisation which may depend on more than one contract,” said CIBAFI in a statement.

“Secondly, the ED states that Islamic financial institutions (IFIs) shall disclose whether they comply in full with the IFSB’s Corporate Governance Standard, and if it not, an explanation of any non-compliance should be disclosed. IFIs in many countries follow the national code or guidelines of corporate governance which are observed first and foremost, thus they are not required to follow the IFSB’s corporate governance standards” the statement continued. 

“Thirdly, The Basel Committee on Banking Supervision (BCBS) has issued a Consultative Document “Pillar 3 disclosure requirements - updated framework” in February 2018. The BCBS’s new updated framework on Pillar 3 disclosure requirements should be reflected in IFSB’s new standard. For instance, the BCBS’s CD provided new disclosure requirements on asset encumbrance and Capital Distribution Constraints (CDC) which should also be reflected in IFSB standards,” the statement concluded.

In its comments, CIBAFI thanked the IFSB for giving the opportunity to the Islamic Financial Services Industry to comment on the Exposure Draft and provided collective feedback of its member banks from over 33 jurisdictions.

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