Tuesday, January 8

Two Islamic Finance Consultation Documents Launched

The Islamic Financial Services Board has launched two documents for consultation, namely on
Capital Adequacy Requirements for Sukuk Securitisations and Real Estate Investment Guiding Principles on Governance for Islamic Collective Investment Schemes. Both are interesting topics. The first talks about better capital and risk management when exposed to Sukuk's (also connected to the Basel II debate, which is a different argument and debate altogether!) and the second one is more about the REIT structures within Islamic Finance.

Do read and reflect. I quote the press release

The ED of Capital Adequacy Requirements for Suk«k Securitisations and Real Estate Investment deals with aspects of regulatory capital requirements for institutions offering Islamic financial services (IIFS) in respect of Suk«k that are not covered in IFSB-1. These include:
capital requirements for IIFS that are holders of Suk«k; and
capital treatment of the exposures of an IIFS where it is, or acts in a capacity such that it is considered to be, the originator of a Suk«k issue, or as an issuer or servicer of a Suk«k issuance.
In respect to real estate investment, the ED deals primarily with:
capital requirements for an IIFS that invests its own funds in real estate investment activities; and
capital treatment of exposures in real estate investment activities where an IIFS either commingles the funds of investment account holders with those of shareholders (and other non-profit-sharing investment account holders) or otherwise invests the funds of unrestricted investment account holders.
The ED of Guiding Principles on Governance for Islamic Collective Investment Schemes aims to complement IFSB-3 and other internationally recognized governance standards, by reinforcing international best practices while addressing the specificities in the governance of Islamic Collective Investment Schemes (ICIS).
The contents of the ED are divided into four parts:
Part I relates to the approach to general governance, whereby the adoption of good governance practices as prescribed in other internationally recognised governance standards is reinforced;
Part II addresses transparency and disclosure and aims to improve the information environment for ICIS investors as well as to build on, amongst other things, the disclosure requirements recommended under the IFSB Disclosures to Promote Transparency and Market Discipline for Institutions Offering Islamic Financial Services (Excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds);
Part III focuses on compliance with Shari'ah rules and principles and addresses various specificities of ICIS that include (a) the process of portfolio screening by ICIS Operators; (b) the role of Shari'ah scholars in monitoring consistent compliance with the Shari'ah; and (c) the process of purification of tainted income; and
Part IV examines additional protection for ICIS investors and highlights the issues of adequacy of representation for investors in the organs of governance of ICIS as well as some prevalent practices (identified from an IFSB survey) that require appropriate oversight
.



All this to be taken with a grain of piquant salt!!!

No comments: