The Islamic Financial Services Board Issue Consultation Documents on Liquidity Risk Management and Stress Testing
The Islamic Financial Services Board (IFSB) has launched Exposure Drafts (EDs) on liquidity risk management and stress testing for a three-month public consultation period lasting until the end of 2011. The suggested document on liquidity risk management aims to describe a set of guiding principles for the robust management of liquidity risk by institutions offering Islamic financial services (IIFS).
These guiding principles outline among others:
1. the salient characteristics of the liquidity risk management process to be undertaken by IIFS including identification, measurement, monitoring, control, reporting and mitigation;
2. the role of various components in the governance structure as well as that of different functional and business units in ensuring robust and effective liquidity risk management by IIFS;
3. the liquidity risk implications of various Islamic financing contracts during different stages of operations;
4. the important ingredients of supervisory frameworks to monitor the liquidity positions including initiatives for the development of a robust national liquidity infrastructure, supervisors' contingency planning for IIFS and supervisors' roles as providers of Shari’ah -compliant liquidity support to IIFS.
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