IFSB, CBN synergise on stronger Islamic financial standards

Islamic Financial Services Board (IFSB) and the Central Bank of Nigeria (CBN) have renewed partnership on the implementation of stronger Islamic Financial Standards to ensure visibility and acceptance in the country.

Since inception of ISFB in 2002, it has issued 24 standards, guiding principles and technical notes that cover a wide spectrum of topics from risk management, capital adequacy, corporate governance, supervisory process, transparency and many others, with the objective of ensuring visibility of Islamic Banking Financial Services across the globe.

At a four-day workshop on implementation of IFSB standards organised by the CBN for selected participants from Jaiz Bank, NDIC, Stanbic IBTC, and a host of others that engage in non-interest banking in the country, Sherif el Sayed Ayoub, assistant secretary-general, IFSB, said the building capacity framework modules for non-interest financial institutions as well as expanding the CBN’s supervisory and regulatory functions would enhance the qualities of measurement for liquidity risk management, which will take important control in the period of financial crisis.

“Basically, we are going to be talking about the pillar one principle, which is ISFB Fifteen, that’s the capacity framework for non-interest banks such as Jaiz Bank, Stanbic, and others. We are also going to be looking at the supervisory process on how the CBN can supervise and regulate this unique institution, which has a different module than the conventional banks,” Ayoub said in his opening remark at the workshop.

Earlier in his welcome address, Kelvin Nnanyere Amugo, director, Financial Policy and Regulation Department, CBN, expressed the apex bank’s hope that the objectives of the workshop, which are aimed at covering the new IFSB 15 and 16 guiding principles, “will ensure reasonable degree of success in the implementation stage and also address some of the challenges of regulating and supervising non-interest financial institutions.”

Ayoub added that the focus of the workshop would harp on building capacity for participants on new guidelines for adequacy standards and guidelines on key elements in the supervisory process for institutions offering Islamic Financial Institutions.

‘’The focus of the workshop is to provide an explanation and interpretation of the ISFB standard with the IFSB members. In the course of the four day workshop for the banking sector, we are going to focus on ISFB 15 and 16, while 15 is the revised cap adequacy standards for institutions offering Islamic Banking Services while the IFSB 16 is the revised guidelines on the key elements in the supervisory process.

“ISFB 15 basically covers the optimum capital necessary framework to facilitate the effective coverage of risk exposures of Islamic Financial Institutions as well the allocation of appropriate capital to cover this risk in the manner that is based predominantly on the standardised approach.

“ISFB 16 offers guidelines and key elements of the supervisory review process for authorities supervising the Islamic Financial Institution because we have seen that supervising Islamic Financial Institution is quite different from supervising a conventional financial institution.

Ayoub also said the IFSB is fine-tuning the process of finalizing its technical support “on stress testing” on liquidity issues. “we are working with the Central Bank of Nigeria on stress testing….” We are expecting to issue that in December this year and we are expecting to present to the council for adoption in the month of April.

On non-interest insurance products, Ayoub said “we are working with NAICOM and we are going to be presenting some of the standards that relates to Takafo specifically, we will be working with them on technical assistance as well that will be required to make sure that this sector goes in a stable and sustainable manner.”