STANDARDS ON REGULATION, SUPERVISION,
DOCUMENTATION & FINANCIAL REPORTING FOR IIFS
KAZAN SUMMIT 2015
Kazan, May 15 th 2015
Prof.Dr.Necdet Şensoy
Central Bank of the Republic of Turkey
1
Disclaimer
The opinions expressed in this presentation
are my personal opinions
2
OUTLINE OF THE PRESENTATION
1. Comparative Overview of the Standard
Setters & Standards
2. Some Examples of the Standards
3. Implementation of the Standards
4. Conclusion
5. Appendix – Islamic Standard Setters
&Their Products
6. References
3
PART 1
Comparative Overview of
the Standard Setters & Standards
4
Importance of Standards
Development, adoption, and
successful implementation of
international standards yields
both national and international benefits
Promote international financial stability
by facilitating better-informed
lending and investment decisions,
improving market integrity
5
STANDARD SETTING ORGANIZATIONS
FOR AUDITING & FINANCIAL REPORTING
CONVENTIONAL
• IASB International
Accounting Standards
Board
• IAASB International
Auditing and Assurance
Standards Board
ISLAMIC
• AAOIFI Accounting
and Auditing Organization
for Islamic Financial
Institutions
6
STANDARD SETTING ORGANIZATIONS
FOR REGULATION & SUPERVISION
CONVENTIONAL
BCBS Basel Committee on
Banking Supervision
IAIS International
Association of Insurance
Supervisors
ISLAMIC
IFSB Islamic Financial
Services board
7
STANDARD SETTING ORGANIZATIONS
FOR REGULATION & UNIFICATION OF MARKETS
CONVENTIONAL
• ISDA International Swaps
and Derivatives
Association
• International Capital
Market Association
• IOSCO The Global
Standard Setter for
securities markets
regulation(IFSB also)
ISLAMIC
IIFM International Islamic
Financial Market
8
Capital Adequacy &
Liquidity Risk Management
Conventional vs Islamic
9
Capital Adequacy
BASEL III
• A global Regulatory
Framework for more
resilient Banks and
Banking Systems
December 2010 & June
2011
IFSB
• IFSB-15 (2013)
Revised Capital
Adequacy Standard for
Institutions offering
Islamic Financial Services
10
Liquidity Risk Management
BASEL III
• International Framework for
Liquidity Risk Management,
Standards and Monitoring
December 2010
• The Liquidity Coverage Ratio
and liquidity risk monitoring
tools
January 2013
• The Net Stable Funding
Ratio
October 2014
IFSB
• Guidance Note -6
Guidance Note on
Quantitative Measures for
Liquidity Risk
Management in Institutions
offering Islamic Financial
Services ( Excluding Takaful
and Islamic Collective
Investment Schemes )
April 2015
11
IFSB & IIFM
The Islamic Financial
Services Board (IFSB)
• IFSB is an international
standard-setting
organisation that promotes
and enhances the
soundness and stability of
the Islamic financial services
industry by issuing global
prudential standards and
guiding principles for the
industry, broadly defined to
include banking, capital
markets and insurance
sectors.
International Islamic
Financial Market ( IIFM )
• IIFM is the international
Islamic financial market’s
organization focused on
the Islamic Capital &
Money Market (ICMM) &
as per recent Board
approval scope is
extended to Corporate
& Trade Finance
segments of the Islamic
Financial Services
12
Industry (IFSI).
STANDARDS FOR
LIQUIDITY MANAGEMENT BY
ISLAMIC STANDARD SETTERS
IFSB
• IFSB-12 (March 2012)
Guiding Principles on
Liquidity Risk
Management for
Institutions offering
Islamic Financial Services
IIFM
• IIFM -1 ( 2008 )
Master Agreement for
Treasury Placement
(MATP) is a global
standard documentation
published in Islamic Finance
for liquidity Management
purpose.
13
STANDARDS FOR
LIQUIDITY MANAGEMENT
IIFM – 5 ( 2013 )
• Inter-Bank Unrestricted
Master Investment Wakalah
Agreement (UMWA)
specifically designed to
provide alternate
liquidity management
product to the Islamic
finance industry in order
to reduce over reliance
on commodity murabaha
based transactions.
14
Master Collateralized Murabaha
Agreement (MCMA)
( Published on 16th November 2014 )
provides a mechanism for access to
liquidity on a collateralized basis
(based on the Shari’ah principle of Ar’rahn)
utilizing Sukuk and other Islamic securities portfolio
as collateral
It is an important new tool for IFI’s
as they seek to address the increased global regulatory
focus on liquidity and collateral
15
PART 2
Some Examples of the Standards
2.1. IFSB-17
2.2. IIFM interbank unrestricted Master
investment wakalah agreement
2.3. AAOIFI Financial Accounting
Standard No. 27
«Investment Accounts»
16
2.1.
IFSB-17
Core Principles for Islamic Finance
Regulation (Banking Segment)
17
Basel Core Principles vs. CPIFR (Banking)

9 BCBS Core Principles were transposed to the CPIFR unamended.

19 principles were transposed with some amendments.

The principle of interest rate risk was not transposed due to entire
inapplicability.

4 new principles that are unique to Islamic finance institutions were
added.
18
Unique CPIFR principles for
IIFS
1. CPIFR 14 - Treatment of Investment
Account Holders (IAH)
2. CPIFR 16 - Sharī`ah Governance
Framework
3. CPIFR 24 - Equity Investment Risk
4. CPIFR 26 - Rate of Return Risk
5. CPIFR 32 - Islamic Windows
19
Unique CPIFR principles for IIFS -IAH

CPIFR 14 - Treatment of Investment Account Holders (IAH): “The supervisory
authority determines how IAH are treated in its jurisdiction. The supervisory authority
also determines the various implications (including the regulatory treatment,
governance and disclosures, and capital adequacy and associated risk-absorbency
features, etc.) relating to IAHs within its jurisdiction.”
 In the current practice, the treatment of UIAH, under a Mudarabah contract, for
the calculation of CAR varies from jurisdiction to jurisdiction.
 Besides, in some countries, IIFS maintain one or both of two types of prudential
reserves, as part of their strategy for mitigating displaced commercial risk: Profit
Equalisation Reserve (PER) and Investment Risk Reserve (IRR).
 If the use of such reserves is not adequately controlled by the supervisory
authority, the consequence is an ‘intergenerational’ problem for IAH, since the
existing IAH are disadvantaged against future IAHs.
 From the above, the Principle embraces the governance issue for PSIAs as well
as the capital adequacy issues.
20
Unique CPIFR principles for
IIFS -UIAH
When Unrestricted Investment Account
Holders are treated as Investors :
• Bear all the earning volatility
• Bear Risk of losses except misconduct &
negligence in part of the IIFS
• So exclude ASSETS financed bu UIA from
denominator of the Capital Adequacy
formula
21
Unique CPIFR principles for
IIFS -UIAH
When UIAs are treated as a LIABILITY of
the IIFS
• IIFS bears the risks of assets funded by
IAH
22
Unique CPIFR principles for IIFS

CPIFR 16 - Sharī`ah Governance Framework: “The supervisory authority determines
that IIFS have a robust Sharī`ah governance system in order to ensure an effective
independent oversight of Sharī`ah compliance over various structures and processes within
the organisational framework. The Sharī`ah governance structure adopted by an IIFS is
commensurate and proportionate with the size, complexity and nature of its business. The
supervisory authority also determines the general approach to Sharī`ah governance in its
jurisdiction, and lays down key elements of the process.”

IIFS have to ensure that their products and services comply with Shari`āh rules and
principles. For this purpose, IIFS rely on the governance process and internal controls.
In all aspects of IIFS operations including products and services, a governance
structure, policies and procedures must exist to ensure that the Shari`āh rules and
principles are adhered to at all times.

The IFSB’s guiding principles on Sharī`ah governance (IFSB-10) address the
components of a sound Sharī`ah governance system, especially with regard to the
competence, independence, confidentiality and consistency of Sharī`ah boards.

The supervisory authority should ensure that an IIFS have in place a comprehensive
framework dealing with various issues such as hiring and dismissing Sharī`ah
scholars, checking accountability and integrity (fit and proper test), and any potential
for conflicts of interest.
23
Unique CPIFR principles for IIFS

CPIFR 24 - Equity Investment Risk:
“The supervisory authority satisfies itself that
adequate policies and procedures including appropriate strategies, risk management and
reporting processes are in place for equity investment risk management, including
Mudārabah and Mushārakah investments in the banking book (i.e. financing on a profitand-loss sharing basis), taking into account the IIFS’s appetite and tolerance for risk. In
addition, the supervisory authority ensures that the IIFS have in place appropriate and
consistent valuation methodologies; define and establish the exit strategies in respect of
their equity investment activities; and have sufficient capital when engaging in equity
investment activities.”
 This principle covers the issues pertaining to the management of
risks inherent in the holding of equity instruments including
Muḍārabah and Mushārakah investments in the banking book for
investment purposes.
 The supervisory authority may develop regulatory guidelines for
measuring, managing and reporting the risk exposures when
dealing with non-performance investments and providing provisions
according to the Sharī`ah rules and regulations.
24
Unique CPIFR principles for IIFS

CPIFR 26 - Rate of Return Risk: “The supervisory authority determines that IIFS have
adequate systems to identify, measure, evaluate, monitor, report and control or mitigate rate of
return (ROR) risk in the banking book on a timely basis. These systems take into account the
IIFS’s risk appetite, risk profile and market and macroeconomic conditions. The supervisory
authority also assesses the capacity of an IIFS to manage the ROR risk and any resultant DCR, and
obtains sufficient information to assess its IAHs’ behavioral and maturity profiles.”
This additional principle is aimed to replace the existing BCP 23 (Interest rate risk).
This principle ensures that the supervisory authority’s assessment will be forwardlooking by evaluating the possible factors in the risk profiles of an IIFS’s portfolio
over the coming period, and the extent to which control of displaced commercial risk
can help mitigate the rate of return risk.
25
Unique CPIFR principles for IIFS

CPIFR 32 - Islamic Windows: “Supervisory authorities define what forms of Islamic “windows”
are permitted in their jurisdictions. The supervisory authorities review Islamic windows’
operations within their supervisory review process using the existing supervisory tools. The
supervisory authorities in jurisdictions where windows are present satisfy themselves that the
institutions offering such windows have the internal systems, procedures and controls to provide
reasonable assurance that: (a) the transactions and dealings of the windows are in compliance
with Sharī`ah rules and principles; (b) appropriate risk management policies and practices are
followed; (c) Islamic and non-Islamic business are properly segregated; and (d) the institution
provides adequate disclosures for its window operations.”
 The issue of Islamic banking ‘windows’ is important. Islamic windows are present
in a majority of the IFSB member jurisdictions where Islamic finance is operating
 Supervisory practices for regulating Islamic windows, in particular relating to
capital requirements, vary considerably across jurisdictions. This diversity of
windows’ operations raises a number of issues on supervision which are
substantially the same as those raised by fully-fledged IIFS.
 This principle covers high level requirements such as governance, risk
management, internal controls, capital adequacy, etc.
26
2.2. IIFM- Interbank unrestricted Master
investment wakalah agreement
( IIFM Inter-Bank Unrestricted Master Investment Wakalah Agreement is
supplemented with an Operational Guidance Memorandum)
This global standard documentation is developed
to be used in the Islamic inter-bank market
between financial institutions
in order to manage their liquidity requirements
The Operational Guidance Memorandum for the Wakalah agreement is
one of the unique features of IIFM efforts
to enhance the development of Islamic finance industry.
This Memorandum is very useful whereby it explains how the
standard to be used and in addition to that it provides very
comprehensive recommendations
27
IIFM Inter-Bank Unrestricted Master Investment
Wakalah Agreement
The Investor, the Muwakkil
will appoint the Wakil as its Agent
to invest its funds in a Shari’ah compliant manner
in exchange for a fee,
the Wakalah pool can be managed
on a segregated asset pool or
comingled asset pool basis at the Wakil’s discretion,
early termination which can be caused by the occurrence of default by either party,
the calculation treatment of these events
are well defined in this documentation
the Wakil is obliged to notify the Muwakkil if the anticipated profit
cannot be achieved etc.,
28
REPO vs. Collateralised murabaha
Conventional repos allow institutions
to lend out assets for short periods
to generate liquidity;
this is disallowed in Islamic finance
as it entails the charging of interest.
Collateral is often lent out by custodians,
a practice known as rehypothecation,
which also contravenes Islamic principles.
Even the phrase "Islamic repo" is problematic among scholars who fear
the instruments will simply replicate conventional financial products
without addressing a real economic need.
29
REPO vs. Collateralised murabaha
Collateralised murabaha
is a cost-plus profit arrangement which tries to avoid
such issues by having the financier buy the asset at market value and
immediately sell the asset to the customer for a mark-up on a deferred payment
basis.
Because the mark-up price is agreed up front by both parties,
this addresses the element of ambiguity, or gharar, a key principle in Islamic
finance.
Transactions can be secured by any sharia-compliant assets, including equities
and sukuk (Islamic bonds).
The standard expressly forbids rehypothecation.
30
AAOIFI-Financial Accounting Standard No. 27
«Investment Accounts» which replaces FAS 5&6
FAS No: 27 Investment Accounts
Updated and Replaced
FAS No: 6 Equity of Investment Account
Holders and Their Equivalent
To be in effect for financial periods beginning
1 January 2016
31
Scope of the standard
FAS 6
This standard addresses
the accounting rules relating to funds
received by the Islamic bank for investment
in its capacity as a mudarib
at the Islamic bank’s discretion,
32
Either in whatever manner the
Islamic bank deems appropriate
Equity of
unrestricted
investment
account holders
or
Equity of
restricted
investment
account holders
( subject to certain
restrictions )
33
Scope of the standard
FAS 27
This standard shall apply to
on-balance sheet and
off-balance sheet,
 unrestricted and
restricted investment accounts
managed by Islamic Financial Institutions.
34
The following are included within the
scope of this standard –FAS 27
a) Investment accounts
based on Mudaraba contracts
which represent
“equity of investment accountholders”
as defined by
the Conceptual Framework; and
35
The following are included within the
scope of this standard –FAS 27
b) Investment accounts that are
based on Mudaraba contracts
that are placed on
“short term basis”
(overnight, seven days, one month basis)
by other financial institutions
as “interbank-bank deposits”
for the purpose of liquidity management
36
An Investment Account
defined by FAS 27
An account
for the holder of an instrument
under a Mudaraba or its equivalent
representing funds
received by the Islamic Financial Institution for
investment
on behalf of the other party (rab al maal)
with or without conditions
as regards how the funds may be invested. (Para 3)
37
Profit sharing Mudaraba based investment accounts
defined by FAS 27
provides authority over decisions
with regards to the use of and deployment of the funds
received by the Islamic Financial Institution
are treated as
equity of investment accountholders and
presented as an on-balance sheet item in
the financial statement of Islamic Financial Institution
(Para 4)
38
Profit sharing Mudaraba based investment accounts
defined by FAS 27
Do not provide authority over decisions
with regards to the use of and deployment of the funds
received by the Islamic Financial Institution
are treated as
equity of investment accountholders and
presented as an off-balance sheet item in
the financial statement of Islamic Financial Institution.
(Para 5)
39
Presentation and disclosure requirements
by FAS 6
Disclosure should be made,
in the notes on significant accounts,
of the percentage of the funds of
unrestricted investment account holders
which the Islamic bank has agreed with them to
invest in order to produce returns for them. (para 15)
40
Presentation and disclosure requirements
by FAS 6
Equity of unrestricted investment account
holders
shall be presented as
an independent category in the statement
of financial position of the Islamic bank
between
liabilities and owners’ equity. (para 16)
41
Presentation and disclosure requirements by FAS 6
Information on
equity of restricted investment account
holders
shall be presented
in the statement of changes in restricted
investments and their equivalent or at the
foot of the statement of financial position.
(para 17)
42
Presentation and disclosure requirements
by FAS 27
Investment Accounts
Equity of
on-balance sheet investment accountholders
shall be presented as an independent category
in the statement of financial position
of the Islamic Financial Institution
between liabilities and owners’ equity
(Para 21)
43
Presentation and disclosure requirements by FAS 27
Investment Accounts
Information on equity of
off-balance sheet investment accountholders
shall be presented in
the statement of changes in off-balance sheet
investment account and their equivalent
or
at the foot notes of the statement of financial position.
(Para 22)
44
PART 3
Implementation of the Standards
3.1. IFSB
3.2. IIFM
3.3. AAOIFI
45
3.1. implementation of IFSB standards
IFSB makes important surveys covering Regulatory and
Supervisory Authorities (RSAs) and market players.
The findings of these surveys, which provided a detailed
picture of the requirements, intentions and plans of its
members over the medium to long term,
gave a clear indication of the direction of
regulatory reforms in Islamic finance.
In particular, the findings highlighted those areas that the
IFSB members feel must be addressed as a priority –
jointly by them and the IFSB – to assist in the all-important
objective of standards implementation
46
Implementation of the IFSB Standards
The IFSB members
implement the IFSB’s standards and guidelines
on a voluntary basis.
Each member of the IFSB is entitled to determine its own
timeline for implementation based on the market and
industry dynamics in its territory/jurisdiction.
The IFSB undertook its third IFSB Standards
Implementation Survey in 2014 (2014 Survey)
to assess the implementation status of
the IFSB standards,
with a view to formulating policy recommendations for the implementation process over the
medium to longer term
.
47
2014 Survey
The number of respondent RSAs was
30 from 22 countries,
which consisted of 21 IFSB full members,
seven associate members, and
two observer members from
Asia, GCC, North Africa and West Africa.
As of end-December 2014,
a total of 16 IFSB standards covering the three sectors
of the IFSI – namely, Islamic banking, Takāful and the
Islamic capital market – were assessed in the survey
questions.
48
The key findings of
the 2014 Survey
(a) Banking Sector
All the IFSB standards in the banking sector,
including those issued recently, have been implemented by one or
more RSAs
Based on the assessment on 22 RSAs which are supervising the
banking sector,
a total of 12 RSAs (55% of respondents) have implemented one or
more standards,
2 RSAs (9%) were in the process of implementing them (“in
progress”), and
6 RSAs (27%) were planning to implement the IFSB standards.
49
IFSB-1: Capital Adequacy,
IFSB-3:Corporate Governance and
IFSB-4: Disclosure to PromoteTransparency and Market Discipline.
About one-third of respondent bankingRSAs
implemented
Another 15–20% of RSAs were
in the process of implementing them, and
about one third of RSAs were
planning to implement those standards.
50
IFSB-15: Revised Capital
Adequacy
Already implemented by
one-third (7 out of 21) of RSAs
within a year after its issuance,
and around 50% (11 outof 21) RSAs
were in the process or
planning to implement the standard.
51
IFSB-13: Stress Testing and
IFSB-16: Revised Supervisory Review Process
More than one-fifth of RSAs had
implemented
and most of the RSAs indicated that they
were
planning to implement those standards.
52
IFSB-12: Liquidity Risk Management
Only IFSB-12: Liquidity Risk Management
has a low implementation rate
(9%, or 2 out of 22 RSAs)
however,
another 41% RSAs (9 out of 22)
were in the process of implementing the
standard
53
IFSB-2
and IFSB-7,
The two IFSB Capital Adequacy Standards for IIFS,
were completely implemented by
70% (7 out of 10 respondent RSAs) and
57% (4 out of 7 respondent RSAs) respectively.
However, the results are not conclusive because
of the low number of responses for these two standards.
Since IFSB-2 and IFSB-7 are mainly based on Pillar 1 of
Basel II, only banking RSAs that are adopting Basel II
responded to these standards.
54
3.2. implementation of IIFM standards
According to
«International Islamic Financial Market (IIFM)
Research Survey 2015»
IIFM Standard Agreements & Product
Templates are;
Used by 43 repondents
39.45%
Not used by 66 respondents
60.55%
( out of 109 respondents )
55
implementation of IIFM standards
The MCMA Agreement used by 21 respondents 45.65%
The Master Wakalah Agreement used by 22
47.83%
PRS Two Sales Structure used by
08
17.39 %
PRS Single Sale Structure used by
08
21.74%
The TMA Agreement used by
26
56.52%
The MATP Agreement used by
26
56.52%
( Total Respondents 46 )
56
The overall rating of the standards developed by IIFM.
37.29% (30) have found the standards
developed by IIFM excellent.
 37.97% (30) have found it
above average
24.05% (19) found it good
(Total Respondents 79 )
57
3.3. implementation of AAOIFI standards
AAOIFI has gained assuring support for the
implementation of its standards, which are now
adopted in the Kingdom of Bahrain, Dubai
International Financial Centre, Jordan,
Lebanon, Qatar, Sudan and Syria. The relevant
authorities in Australia, Indonesia, Malaysia,
Pakistan, Kingdom of Saudi Arabia, and South
Africa have issued guidelines that are based on
AAOIFI’s standards and pronouncements.
58
4. CONCLUSION
Regulation, supervision, documentation and financial
reporting are very critical issues
regarding the confidence on Institutions offering Islamic Financial Services
because of the fiduciary relation as well as all other
Institutions offering Financial Services
It is a must for Financial Stability to have standards in such issues
Globalization of Islamic Finance by cross border
transactions and multinational investments requires high
quality standards for having international confidence and
trust on islamic financial instruments and institutions
59
CONCLUSION (cont.)
Parallel to the development of Islamic Finance Industry and
its international recognition,
international standard setters on Islamic Finance Industry
are having cooperation with conventional standard setters
Because of the dynamic and inductive nature
of such standards
there is a continuous change depending on the needs of
the industry best practices
60
PART 5
Appendix :
Islamic Standard Setters & their Products
5.1. IFSB
5.2. IIFM
5.3. AAOIFI
61
5.1. IFSB
Started operations in 2003
The Islamic Financial Services Board (IFSB) is
an international standard-setting organisation
that promotes and enhances the soundness and
stability of the Islamic financial services industry
by issuing global prudential standards and
guiding principles for the industry,
broadly defined to include banking, capital markets
and insurance sectors.
62
IFSB
• The IFSB also conducts research and
coordinates initiatives on industry related
issues, as well as organises roundtables,
seminars and conferences for regulators
and industry stakeholders.
63
IFSB
To this end,
the work of the IFSB complements that of
 the Basel Committee on Banking Supervision
 International Organisation of Securities
 Commissions and the International Association
of Insurance Supervisors.
64
IFSB
As at April 2015,
the 188 members of the IFSB comprise
61 regulatory and supervisory authorities,
08 international inter-governmental organisations, and
119 market players
(financial institutions, professional firms and industry
associations) operating in 45 jurisdictions.
65
Standards Published by IFSB
• December 2005: IFSB-1: Guiding
Principles of Risk Management for
Institutions (other than Insurance
Institutions) offering only Islamic Financial
Services (IIFS)
• December 2005: IFSB-2: Capital
Adequacy Standard for Institutions
(other than Insurance Institutions) offering
only Islamic Financial Services (IIFS)
66
December 2006: IFSB-3:
Guiding Principles on
Corporate Governance for
Institutions offering only
Islamic Financial Services
(Excluding Islamic Insurance (Takâful)
Institutions and Islamic Mutual Funds
December 2007: IFSB-4:
Disclosures to Promote
Transparency and Market
Discipline for Institutions offering
Islamic Financial Services (excluding
Islamic Insurance (Takâful) Institutions and
Islamic Mutual Funds)
67
December 2007: IFSB-5: Guidance on Key
Elements in the Supervisory Review
Process of Institutions offering Islamic
Financial Services (excluding Islamic
Insurance (Takâful) Institutions and Islamic
Mutual Funds)
December 2008: IFSB-6: Guiding Principles on
Governance for Islamic Collective
Investment Schemes
January 2009: IFSB-7: Capital Adequacy
Requirements for Sukûk, Securitisations
and Real Estate investment
December 2009: IFSB-8: Guiding Principles on
Governance for Takâful (Islamic Insurance)
Undertakings
December 2009: IFSB-9: Guiding Principles on
Conduct of Business for Institutions
offering Islamic Financial Services
68
December 2009: IFSB-10: Guiding Principles on
Sharîah Governance Systems for
Institutions offering Islamic Financial Services
December 2010: IFSB-11: Standard on
Solvency Requirements for Takâful
(Islamic Insurance) Undertakings
March 2012: IFSB-12: Guiding Principles on
Liquidity Risk Management for Institutions
offering Islamic Financial Services
March 2012: IFSB-13: Guiding Principles on
Stress Testing for Institutions offering Islamic
Financial Services
December 2013: IFSB-14: Standard On
Risk Management for Takāful (Islamic
Insurance) Undertakings
69
December 2013: IFSB-15: Revised
Capital Adequacy Standard for
Institutions Offering Islamic Financial
Services [Excluding Islamic Insurance
(Takāful) Institutions and Islamic
Collective Investment Schemes]
March 2014: IFSB-16: Revised Guidance
on Key Elements In The Supervisory
Review Process of Institutions Offering
Islamic Financial Services (Excluding
Islamic Insurance (Takāful) Institutions
and Islamic Collective Investment
Schemes)
70
April 2015 IFSB-17
Core Principles for Islamic
Finance Regulation (Banking
Segment)
71
Guidance Notes by IFSB
• March 2008: GN-1: Guidance Note in
Connection with the Capital Adequacy
Standard: Recognition of Ratings by External
Credit Assessment Institutions (ECAIs) on
Sharî'ah-Compliant Financial Instruments
• December 2010: GN-2: Guidance Note in
Connection with the Risk Management and
Capital Adequacy Standards: Commodity
Murâbahah Transactions
72
December 2010: GN-3: Guidance Note on the
Practice of Smoothing the Profits Payout to
Investment Account Holders
March 2011: GN-4: Guidance Note in
Connection with the IFSB Capital
Adequacy Standard: The Determination of
Alpha in the Capital Adequacy Ratio for
Institutions (other than Insurance
Institutions) offering only Islamic Financial
Services
March 2011: GN-5: Guidance Note on the
Recognition of Ratings by external Credit
Assessment Institutions (ECAIS) on
Takâful and ReTakâful Undertakings
73
Technical Notes by IFSB
TN-1: Technical Note on
Issues in Strengthening
Liquidity Management of
Institutions Offering Islamic
Financial Services: The
Development of Islamic
Money Markets
74
5.2. IIFM
International Islamic Financial Market
IIFM is
the international Islamic financial market’s
organization
focused on the Islamic Capital & Money
Market (ICMM)
segment of the Islamic Financial Services
Industry (IFSI).
75
IIFM
Founded in 2002 by
Islamic Development Bank,
Autoriti Monetari Brunei Darussalam,
Bank Indonesia,
Central Bank of Bahrain,
Central Bank of Sudan and
the Bank Negara Malaysia (delegated to Labuan
Financial Services Authority)
as a neutral and non-profit organization.
76
IIFM
Besides the founding members,
IIFM is also supported as member by certain
regulatory and government bodies such as,
The National Bank of Kazakhstan,
Indonesian Financial Services Authority,
as well as by a number of international and
regional financial institutions and other
market participants as its members.
77
Expanded IIFM scope of work
(only standard setting organization which develop standardized Islamic
financial contracts and product templates )
In addition to existing focus of
Capital & Money Market standard agreements and
products templates.
Included
Corporate Finance & Trade Finance segment
This to further enhance the development of Islamic
financial industry globally through its documentation and
Islamic products unification efforts which are much needed
for a robust, transparent and vibrant industry.
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Producing standard documentation by IIFM
IIFM has taken a pioneering role
in producing standard documentation
in specific areas for the Islamic finance industry
in order to provide Shari’ah harmonization,
best practices, transparency and clarity for sound
business activities
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Published Standards by IIFM
1. IIFM Master Collateralized Murabahah Agreement
2. IIFM Reference Paper on I’aadat Al Shira’a (Repo Alternative)
and Collateralization
3. IIFM Standard Agreements Adaptation Procedures & Policies
for Institutions
4. IIFM Standard on Interbank Unrestricted Master Investment
Wakalah Agreement
5. ISDA/IIFM Mubadalatul Arbaah (MA) (Profit Rate Swap)
6. ISDA/IIFM Tahawwut (Hedging) Master Agreement (TMA)
7. Master Agreement for Treasury Placement (MATP)
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IIFM Guidances
 Operational Guidance Memorandum For
International Islamic Financial Market (IIFM)
Interbank Unrestricted Master Investment Wakalah
Agreement
 Master Collateralized Murabahah Agreement
Opretatıonal Guidance Memorandum
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Market Research by IIFM
1.
IIFM Sukuk Report (4th Edition) A Comprehensive study of the Global
Sukuk Market
2. IIFM Sukuk Report (3rd Edition) A Comprehensive study of the Global
Sukuk Market
3. Islamic Finance news - Bahrain Report 2007
4. Inter – Bank Unrestricted On-Balance Sheet Master Wakalah Agreement
(Concept Paper)
5. Concept Paper on Mubadalatul Arbaah (Profit rate swap)
6. IIFM Reference Paper on I'aadat Al Shira'a (Repo Alternative) &
Collateralization Possibilities
7. IIFM Sukuk Report (2nd Edition) A Comprehensive Study of the Global
Sukuk Market
8. IIFM Sukuk Report (1st Edition)
9. IIFM Sukuk Analysis (as of December 2009)
10. IIFM Study on Indonesian Sukuk Market & Global Sukuk Issuances
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5.3. AAOIFI
The Accounting and Auditing Organization for Islamic
Financial Institutions(AAOIFI) is
an Islamic international autonomous non-for-profit
corporate body that prepares accounting, auditing,
governance, ethics and Shari'a standards for Islamic
financial institutions and the industry.
Professional qualification programs (notably CIPA, the
Shari’a Adviser and Auditor "CSAA", and the corporate
compliance program) are presented now by AAOIFI in its
efforts to enhance the industry’s human resources base
and governance structures.
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AAOIFI
As an independent international organization,
AAOIFI is supported by institutional members
(200 members from 40 countries, so far)
including
central banks,
Islamic financial institutions, and
other participants from the international Islamic
banking and finance industry, worldwide.
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STANDARDS BY AAOIFI
«Accounting and Auditing Organization
for Islamic Financial Institutions»
promulgated 5 group of Standards :
1.Sharia Standards
2.Accounting Standards
3.Auditing Standards
4.Governance Standards
5.Ethics Standards
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6.REFERENCES
•
•
•
•
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Web site of Islamic Financial Services Board ( IFSB) , www.ifsb.org
Islamic Financial Services Industry Stability Report by IFSB, 2015
Web site of AAOIFI, www.aaoifi.com
Web site of IIFM, www.iifm.net
Adel Mohammed Sarea, The Level of Compliance with AAOIFI
Accounting Standards: Evidence from Bahrain
• International Islamic Financial Market (IIFM) Research Survey
Questionnaire, Results & Analysis (the Report), April 2015
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Thank You For your Attention
Necdet.Sensoy@tcmb.gov.tr
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