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Press Release
13 May | Friday
The IFSB Successfully Organises a Regulators’ Forum at GIFF 5.0
Kuala Lumpur, 12 May 2016 - The Islamic Financial Services Board (IFSB) has successfully organised a Regulators’ Forum themed, “Islamic Finance in 2016 and  Beyond: Challenges, Opportunities and Evolving Regulatory Focus” on 10 May 2016 in Kuala Lumpur, Malaysia. This Forum was held in conjunction with
the  Global  Islamic  Finance  Forum  5.0,  organised by the Association of Islamic Banking Institutions Malaysia (AIBIM) on 10 – 12 May 2016 at Sasana Kijang, Bank Negara Malaysia.



The  half-day Regulators’ Forum, attended by over 100 delegates from across the  world,  was  conducted  in  an  interactive  environment which enabled speakers  and  participants  to  explore  the  implications  on the Islamic financial services industry (IFSI) from evolving global regulatory reformed agenda while raising awareness on the emerging challenges in the resilience and  stability  of the IFSI. The IFSB’s Islamic Financial Services IndustryStability Report 2016, the fourth edition in this series, was also launched by H.E. Dr. Hendar, Deputy Governor of Bank of Indonesia during the Forum.


In  his Keynote Address, H.E. Dr. Hendar, expressed his appreciation on the progress  made by the global IFSI in many frontiers. Noting the uncertainty in  the  global  economy propelled by the falling economic growth rates and depressed  energy and commodities prices, H.E. Dr. Hendar observed that the Islamic  finance  sector was able to preserve its overall worth on the back of  sustained  resilience  in  the  Islamic banking and takaful sectors. He highlighted  the  need for IFSI stakeholders to focus on early detection of vulnerabilities  in  order to withstand any future economic crisis; in this regard  he  commended  the  IFSB’s annual IFSI Stability Report series that provided a holistic analysis of the trends, developments and imminent risks (if  any)  to  the stability of the global IFSI. As a member of the G20 and also  a founding member of the IFSB, he expressed Indonesia’s commitment to implement  international standards, including for the IFSI. H.E. Dr. Hendar also reiterated the importance of the global financial inclusion agenda and discussed how models of the Islamic economy, such as waqf, can offer useful solutions  for  poverty  alleviation. He also stressed the need for greater focus  and  proactivity  among Islamic finance stakeholders with regard the global   technological   revolution   where alternative  models,  such  as crowdfunds are taking root.

The  Secretary-General  of  the  IFSB, Jaseem Ahmed, in his Opening Remarks informed  the  audience  that, in line with the international developments, the  IFSB  has  responded  with  a  series  of  next-generation  prudential standards  and guiding principles that align global regulatory developments with  the  specificities  of Islamic finance; while also assisting national financial  sector  supervisors  to  provide  a level playing field for IIFS vis-à-vis  their  conventional counterparts. He referred to the IFSB’s Work Plan  in  recent years which has placed a high priority on putting in place standards  encompassing  higher  and  better  quality capital and liquidity buffers,   and   an   increased   focus   on   macroprudential  regulation. Particularly,  he  referred  to the issuance of IFSB-17 Core Principles for Islamic  Finance  Regulation  (Banking  Segment)  and GN-6 Guidance Note on Quantitative   Measures  for  Liquidity  Risk  Management  in  Institutions offering  Islamic  Financial Services (IIFS). He also informed the audience about  the  IFSB’s  upcoming  Technical  Note-2 on Stress Testing for IIFS,which  aims  to  provide  regulatory and supervisory authorities and market players  of  the Islamic  banking  industry  with appropriate and adequate technical guidance to develop, conduct and assess stress tests. Finally, he discussed  the  key  findings  of the IFSB’s IFSI Stability Report 2016 and
called  for  a  more  coordinated  action  by  IFSI stakeholders to address emerging  issues  in  the  industry, such as the need for Shariah-compliant
high-quality liquid assets and capital instruments.

The first session of the Forum titled “Outlook and Opportunities of IFSI in 2016 and Beyond: Sustaining IFSI Growth and Resilience Amid Challenges” was chaired  by  Rushdi  Siddiqui,  Co-Founder  and  Chief Executive Officer of Zilzar,  USA.  He started the session with the paradigm question on whether the  rapid  growth  of  Islamic  finance  is coming to an end on account of external shocks, and proceeded to invite the panellists to discuss how well developed  were  early  warning  signals  in  the  industry  to measure and mitigate risks through, for instance stress tests and established financial safety-nets,  which  are critical to enhance consumer confidence. The first panellist  Raja  Teh Maimunah, Managing Director & Chief Executive Officer, Hong  Leong Islamic Bank, Malaysia noted that Islamic banks in Malaysia are already subject to recent regulations e.g. Basel III and hence, are already focusing   on   resilience   by   meeting   robust  capital  and  liquidity requirements. She however raised awareness that Islamic banks need to focus on  differentiating  themselves  in  terms of consumer offerings to sustain their growth and expansion.

The  second  panellist,  Ashar  Nazim, Partner, Financial Services, Head of Global Islamic Banking Center, Ernst & Young, Bahrain stressed that Islamic banks  need  to adopt a more futuristic strategy and be engaged in exciting innovations.  He  highlighted  that  there  is  a  major  asset origination challenge in Islamic finance as roughly an estimated USD 400 billion to USD 500 billion is mobilised from Shariah sensitive customers and then brokered into  the  conventional  financial  system using various contracts. He also questioned  the  rise  of  FINTECH  which  has been adopted in IFSI and the preparedness  of  the  regulators in the changing dynamics of the industry. Meanwhile,   the   third   panellist,  Peter  Kruschel,  Director,  Banking Supervision,  Federal  Financial  Supervisory  Authority  (BaFin),  Germany shared  the  experience  of  Germany  where  the first Islamic bank started operations  in  July  2015. In his view, an accommodative regulatory regime needs  to  be put in place in Europe to thrive profitability of the Islamic banking  business.  He  noted  that there is a lot of potential for Islamic capital  market  in Europe and in this regard, sukuk is actively pursued by some European governments.

The  second session, themed “Global Regulatory Reforms: The Islamic Finance Response”  was  chaired  by  Mushtak  Parker,  Editor of the Islamic Banker Magazine,  UK,  who  began  the  session  by  framing the background on the post-2008 crisis reform agenda led by the G20. He credited the work done by the  IFSB in terms of developing standards, guidance and technical notes tocorrespondingly  help  the  regulatory development for the IFSI. The first panellist  for  this  session,  Badlisyah Abdul Ghani, President, Chartered
Institute  of  Islamic  Finance  Professionals, Malaysia suggested that any effective and efficient regulatory framework should most importantly create value  for  Islamic  banks.  He  noted  that  Islamic  banks  are still not sufficiently  facilitated to conduct cross-border business as accommodative regulations  for  Islamic  finance  do  not exist in many jurisdictions. He added  that  other  countries  can  benefit from Malaysia’s four decades of
Islamic  finance experience and develop suitable frameworks to implement in their jurisdictions.

The  second  panellist,  Basheer  Ahmad,  Senior Manager, Markets Division, Dubai  Financial Services Authority (DFSA), UAE, spoke about the regulatory framework  at the DFSA, which has implemented many of the IFSB’s Standards. He  highlighted  the  need  for  more efforts by standard-setting bodies to address remaining issues; for instance, the Shariah view with regard to the point of an Islamic banks’ non-viability which will trigger the Basel III / FSB-15  Additional Tier-1 and Tier-2 instruments to absorb losses. Finally the  third  panellist,  Mohd Sobri Mansor, Deputy General Manager, Policy & International  Division, Malaysia Deposit Insurance Corporation, shared his perspectives  on  the  critical role of deposit insurance schemes that have
gained  prominence  following  the  global  financial  crisis. In his view, Shariah-compliant deposit insurance schemes provide an ideal opportunity to strengthen  the  resilience  of  Islamic banks since they help in enhancing depositors’ confidence. He noted these should be put in place, at least, in the 11 countries which the IFSB’s IFSI Stability Report 2016 has identified to be systemically important.

The  IFSB’s  Regulators’  Forum  was generally appreciated as it encouraged broad  interaction  and discussion  between delegates on new and pertinent issues, with a view to finding greater harmonisation within the industry.
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