Front Matter Page
THE CORE PRINCIPLES FOR ISLAMIC FINANCE REGULATIONS AND ASSESSMENT METHODOLOGY
May 2018
IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its May 9, 2018 consideration of the staff report.
The Staff Report, prepared by IMF staff and completed on April 6, 2018 for the Executive Board’s consideration on May 9, 2018.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Electronic copies of IMF Policy Papers are available to the public from http://www.imf.org/external/pp/ppindex.aspx
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© 2018 International Monetary Fund
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THE CORE PRINCIPLES FOR ISLAMIC FINANCE REGULATIONS AND ASSESSMENT METHODOLOGY
April 6, 2018
Executive Summary
This paper provides a proposal to incorporate the Core Principles for Islamic Finance Regulation (Banking Sector) (CPIFR) issued by the Islamic Financial Services Board (IFSB),1 as part of the standards used in assessing the banking regulatory and supervisory regimes of relevant member jurisdictions under the Financial Sector Assessment Program (FSAP) and the Reports on Observance of Standards and Codes (ROSCs). The CPIFR largely reflects the order of the Basel Core Principles on Effective Banking Supervision (BCP), with five additional principles that are specific to Islamic banking operations. Thus, for countries that have systemically significant Islamic banking sector, the assessment of the banking regulation and supervision regime of the jurisdiction would be against the CPIFR (for fully Islamic banking systems) or BCP and the five additional core principles under the CPIFR (for dual banking systems). The Fund staff is seeking the endorsement of the Executive Board on this proposal.
Approved By
Aditya Narain (MCM), Ross B. Leckow (LEG), and Aasim M. Husain (MCD)
Shamsiah Yunus, Nigel Jenkinson (IMF), and Abayomi Alawode (World Bank) comprising Mohamed Norat (AFR), Nadia Rendak, Julianne Ams, Arz Murr, Chady El Khoury, Elsie Addo Awadzi (LEG), Phil de Imus, Alison Holland, Padamja Khandelwal, Inutu Lukonga (MCD), Rachid Awad, Abdullah Haron, Alejandro Lopez-Mejia, Shamloo Maral and Ghiath Shabsigh (MCM), Artak Harutyunyan and Samah Torchani (STA). Administrative support was provided by Natalia Naryshkina.
Contents
Glossary
INTRODUCTION
OVERVIEW OF THE CPIFR
APPLICATION OF THE CPIFR
PRINCIPLES SPECIFIC TO ISLAMIC BANKS IN CPIFR
A. Treatment of PSIA/IAHs (CPIFR 14)
B. Sharī`ah Governance Framework (CPIFR 16)
C. Equity Investment Risk (CPIFR 24)
D. Rate of Return Risk (CPIFR 26)
E. Islamic “Windows” Operations (CPIFR 32)
TECHNICAL ASSISTANCE
RESOURCE IMPLICATIONS
BOX
1. Islamic Finance—Key Principles Governing Islamic Banking
APPENDICES
I. The Islamic Financial Services Board
II. The Fund’s Involvement in Islamic Finance
III. Mapping the BCPs and CPIFR Approach
IV. List of Countries with Islamic Banking Assets
V. Key Unique Risks in IBs
VI. Summary of the Unique CPIFR and the Corresponding Methodology
Glossary
| AAOIFI |
Accounting and Auditing Organization for Islamic Financial Institutions |
| AC |
Additional Criteria |
| AsDB |
Asian Development Bank |
| AM L/CFT |
Anti-Money Laundering and Combating the Financing of Terrorism |
| BCBS |
Basel Committee on Banking Supervision |
| BCP |
Basel Core Principles for Effective Banking Supervision |
| BOD |
Board of Directors |
| CAGR |
Compounded Annual Growth Rate |
| COI |
Cooperating Institution |
| CPIFR |
Core Principles for Islamic Finance Regulation (Banking Sector) |
| DCR |
Displaced Commercial Risk |
| FATF |
Financial Action Task Force |
| FSAP |
Financial Sector Assessment Program |
| FSB |
Financial Stability Board |
| IAH |
Investment Account Holders |
| IAIS |
International Association of Insurance Supervisors |
| IB |
Islamic Banks |
| IFSB |
Islamic Financial Services Board |
| IIFS |
Institutions Offering Islamic Financial Services |
| ILD |
Investment-Linked Deposit |
| IOSCO |
International Organization of Securities Commissions |
| IRR |
Investment Risk Reserve |
| IsDB |
Islamic Development Bank |
| ML/TF |
Money Laundering and Terrorism Financing |
| PER |
Profit Equalization Reserve |
| PLS |
Profit and Loss Sharing |
| PSIA |
Profit Sharing Investment Accounts |
| RIA |
Restricted Investment Account |
| ROR |
Rate of Return |
| ROSC |
Reports on Observance of Standards and Codes |
| RSA |
Regulatory and Supervisory Authorities |
| RTACs |
Regional Technical Assistance Centers |
| SDG |
Sustainable Development Financing Goals |
| TA |
Technical Assistance |
| UFR |
Use of Fund Resources |
| URIA |
Unrestricted Investment Account |
Front Matter Page
Press Release No. 18/193
FOR IMMEDIATE RELEASE
Ma 24 2018
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