Know The Role of the Islamic Financial Services Board (IFSB)

What Is the Islamic Financial Services Board (IFSB)?

The Islamic Financial Services Board (IFSB) is an international standard-setting body that promotes Islamic banking’s soundness and stability by issuing global prudential standards and guiding principles in areas such as capital adequacy, corporate governance, risk management, and transparency, among others.

The Concept IFSB

The Islamic Financial Services Board came into existence in early 2003 in Kuala Lumpur, Malaysia. It was the decision of the group of central banks and the Islamic Development Bank. The objective of the organization is to raise awareness of the issues, especially issues that may affect the Islamic financial services industry. In addition, it publishes Sharia-compliant standards. Also, hosts conferences and seminars, and provides guidance and oversight. Furthermore, the organization consists of:

  • The general assembly, which consists of all members of the ISFB.
  • The Council of IFSB’s policy-making body, which includes the senior executives of each full member of the organization.
  • The executive committee provides operational and administrative advice to the council.
  • The technical committee, which provides advice to the council on topics.
  • The technical committee’s working group, which drafts standards and recommendations and reports to it.
  • The task force in charge of impromptu activities.
  • The Arabic Editing Committee, which converts ISFB papers into English from Arabic.
  • The secretariat, which serves as the council’s main administrative body and is led by a secretary-general nominated by the council.

Membership of Islamic Financial Services Board

The IFSB had 188 members as of December 2020, including 80 regulatory and supervisory bodies, and 10 international intergovernmental organizations. Furthermore, it includes 98 market participants, which included financial institutions, professional firms, industry groups, and stock exchanges.

Additionally, an entity can apply for one of three categories of memberships: full membership, associate membership, or observer membership.

IFSB plays an important role in promoting Islamic finance. The organization develops the new standards by adapting the existing international standards consistent with Shariah principles.  The urgency of the IFSB establishment was because the Basel Committee standards on banking supervision cannot be applied ‘as is’ on Islamic banks. Furthermore, The IFSB’s work complements the Basel Committee on Banking Supervision, the International Organization of Securities Commissions, and the International Association of Insurance Supervisors in this regard.

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