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The Islamic Financial Services Board (IFSB) released on 1 April that the IFSB Council adopted two documents to further facilitate efforts towards enhancing the soundness and stability of the Islamic financial services industry.

In its 12th meeting held at the Islamic Development Bank's (IDB) headquarters in Jeddah on March 26th 2008, the Council of the Islamic Financial Services Board (IFSB) resolved to approve two documents that aim to further facilitate efforts towards enhancing the soundness and stability of the Islamic financial services industry. The two documents are:

Guidance Note in Connection with the Capital Adequacy Standard: Recognition of Ratings by External Credit Assessment Institutions (ECAI) on Shari'ah-Compliant Financial Instruments (Guidance Note)

Technical Note on Issues in Strengthening Liquidity Management of Institutions Offering Islamic Financial Services: The Development of Islamic Money Markets (Technical Notes)

Guidance Note in Connection with the Capital Adequacy Standard: Recognition of Ratings by External Credit Assessment Institutions (ECAI) on Shari'ah-Compliant Financial Instruments (Guidance Note)

The Guidance Note aims to complement existing international guidelines and to provide guidance to national supervisory authorities. It's objective is to outline criteria which the IFSB recommends national supervisors take into account when determining which External Credit Assessment Institutions (ECAIs) or more commonly known as rating agencies may have their ratings used to calculate capital adequacy ratios under the IFSB's December 2005 Capital Adequacy Standard.

The IFSB trusts that the Guidance Note, which was previously issued for a three-month public consultation period, will promote a wider debate on key points of rating methodology for Shari'ah-compliant instruments. In developing this Guidance Note, the IFSB has benefited from discussions with regulatory and supervisory authorities, rating agencies and market participants in various IFSB workshops on ratings assessment issues held in 2003, 2006 and 2008.

The Council approved the Guidance Note and recommended its adoption among members of the IFSB.

Technical Note on Issues in Strengthening Liquidity Management of Institutions Offering Islamic Financial Services: The Development of Islamic Money Markets (Technical Notes)

The Technical Notes aim to address the following critical components of the systemic liquidity infrastructure by focusing on:

monetary operations using tradable Islamic money market instruments;
public debt and financing management operations that supply, in sufficient volume and on predictable schedule, tradable government Islamic finance instruments;
appropriate trading and market micro-structure for these instruments; and
associated payment settlement system that fulfils the requirements of Shari'ah.

The Council of the IFSB approved the Technical Notes.

The 12th meeting of the IFSB Council was chaired by H.E. Dr. Shamshad Akhtar, Governor of the State Bank of Pakistan, and attended by 13 central banks' governors, 3 governors' representatives and the President of the IDB. It was followed by the IFSB General Assembly.

Both documents will be available from the IFSB website www.ifsb.org

Source: www.ifsb.org