IFSB emphasises significance of mutual cooperation

Secretary-General says collaboration among stakeholders good for sustained growth of IFSI

KUALA LUMPUR, April 20: The IFSB then Secretary-General, Jaseem Ahmed emphasised the significance of mutual collaboration among all stakeholders for sustained growth of the Islamic financial services industry (IFSI), highlighting the forward agenda of the industry, particularly in areas of capacity development, integration into the governments’ policy-making agenda, risk management issues as well as tax, legal and regulatory issues, among others. Speaking at the IFSB’s Members and Industry Engagement Session, held on April 5, 2017, he addressed the IFSB’s role in the context of this forward agenda with respect to the implementation of the IFSB’s Strategic Performance Plan 2016-18 that helps to align the IFSB activities with the needs of IFSI and the post-crisis global regulatory architecture. Ahmed retired as the IFSB Secretary-General on April 14, 2017.

In his presentation titled, “The Global Islamic Financial Industry and the IFSB”, Jaseem reflected on the IFSB’s performance and achievements over the past decade, noting especially, the work done on the IFSB’s preeminent mandate to issue a range of cross-sectoral standards that aim to provide a consistent and robust regulatory framework across jurisdictions; the sustained efforts to assist implementation of IFSB Standards, which he noted is a big part of the future work of the IFSB; the launch of Core Principles for Islamic Finance Regulation (IFSB-17), and the dissemination of Soundness Indicators amongst important developments.

In his presentation, he also revealed that the implementation of the IFSB Standards has been increasing, particularly the new generation of IFSB standards issued post crisis, which have notably had higher take-up rates since their issuance. He also underlined some of the important initiatives of the IFSB including the E-learning platform, as well as the IFSB’s annual flagship publication, the Islamic Financial Services Industry Stability Report — the latest issue of which is targeted for release in May 2017. The Stability Report will look at stability and resilience aspects of various sectors in Islamic finance, as well as emerging issues related to Fintech and stress testing in Islamic banks.

Jaseem’s presentation also captured the past decade, and the mid-term outlook of the IFSI, highlighting the rapid growth of Islamic finance over the past decade. Taking note of the slowdown in growth over the last two years, due largely, to external factors, he emphasised that there are other structural and fundamental factors that will be driving up Islamic finance. He also stated that despite witnessing a slight contraction in sukuk issuances in recent years, there is an optimistic outlook for the industry, and that its fundamentals will continue to bolster it towards an upward trend with the passage of time. He further emphasised that although growth rate has slowed down, it has taken place in an environment in which jurisdictions having systemically significant Islamic banking sectors with more than 15% market share have increased to 12. In this connection, he also pointed to an important recent development, the announcement by the IMF Board, of the consideration of adopting the IFSB Core Principles for Islamic Finance Regulation for the banking sector, particularly in jurisdictions where Islamic banking is of systemic importance.

He further highlighted the role of the IFSB in the context of global regulatory reforms, noting that the IFSB Standards are designed to support the orderly development of a rapidly growing industry within a national context, with standards that are benchmarked against those issued by Basel, IOSCO and IAIS, and with the specificities of Islamic finance in mind. He noted that one of the major activities undertaken by the IFSB was to rapidly adapt and issue new standards in the aftermath of the global financial crisis, adopting the newly emerging thinking on what the financial stability framework should look like.

During his presentation, in addition to illustrating the wide geographical coverage of the IFSB’s activities and its membership base, Jaseem also commended the strong support received by the Secretariat from the members of the IFSB. He shared, with respect to the composition of the IFSB’s membership that the number of regulatory and supervisory authorities has continued to expand throughout the past decade.

Similarly, with respect to geographical spread, Asia and the Middle East make up the largest segments, while membership from the African region is the fastest growing segment.