Regulation

Man-Brothers-Group-Menu-RegulationMan-Brothers-Islamic-Financial-InstitutionThe difficulty in control and regulation of Islamic financial institutions arises from the fact that the countries involved in this sector does not have all the same approach intended to create new methodologies and techniques of risk management. However, efforts for standardization, regulation and supervision of these institutions have intensified since some years. And through the role played by the Islamic Development Bank (IDB), several internationally acceptable norms and procedures have been developed and participate in strengthening of the architecture of the sector in various countries.

There are also several other international Islamic institutions which work for the definition of financial standards compliant with Sharia and their harmonization between different countries, the most influent are the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Islamic Financial Services Board (IFSB), the International Islamic Financial Market (IIFM), the Liquidity Management Center and International Islamic Rating Agency (IIRA).

AAOIFI, founded in Bahrain in 1991, formulates standards in several domains, including corporate governance, accounting and minimum working capital requirements.

IFSB, created in 2002, is a standardization organization which has 195 members (September 2010), of which 52 regulatory and supervisory authorities, 6 intergovernmental organizations and 137 market stakeholders operating in 40 jurisdictions. It produces standards, guiding principles and technical notes pertaining to a certain number of areas: risk management, working capital adequacy, corporate governance, prudential surveillance process, transparency and market discipline, consideration of financial instruments Halals in the ratings, development and conduct of the money market.

IIFM was created by central banks and monetary authorities in Bahrain, Brunei, Indonesia, Malaysia, Sudan and Islamic Development Bank. Headquartered in Saudi Arabia, is an infrastructure institution whose mission is the establishment, development, self-regulation and promotion of Islamic capital and money markets.

IIRA is the only rating agency that evaluates the Islamic banking sector. Created in 2002 in Bahrain, it aims to promote the entry of Islamic institutions in international markets. Its researches have enabled to develop several standards related to the levels of transparency and identification of risk profiles.

From its side, the International Monetary Fund (IMF) issued recommendations to Islamic financial institutions several times, particularly through its Financial Sector Assessment Program (FSAP) and its reports on the standards and codes. The recommendations are intended for compliance of financial and prudential Islamic standards with the reference documents of Basel (1, 2 and 3) and IAS/IFRS Committee, and thus ensure better governance and stability of the banking system.