The General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has provided its comments to the Accounting & Auditing organisation for Islamic Financial Institutions (AAOIFI) on its Exposure Draft (ED) on Governance Standard for Islamic Financial Institutions (GSIFI) No. 10: Shari'ah Compliance and Fiduciary Ratings for Islamic Financial Institutions.
In its submission, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic financial services industry stakeholders to comment on its GSIFI No. 10 before its issuance and provided comments comprising key points as well as detailed analysis.
Fundamentally, CIBAFI members raised some concerns on the purpose of the ED and potential parties that would be interested in it. Hence it was not explicitly clear how far customers and other counterparties would understand and use ratings of this kind, therefore whether they would have any commercial value. On the other hand, any regulator with a sufficient interest in Shari'ah governance to consider mandating such a rating would be more likely to impose Shari'ah governance requirements on firms and supervise them directly. It is therefore unclear how Shari'ah compliance ratings would fit into the Shari'ah governance structure in different jurisdictions. This in turn raises the question of what purpose a standard in this area would serve for the Islamic finance industry.
On a separate note, CIBAFI recommended for more time to be spent on having discussions and views with different stakeholders from different jurisdictions, and involvement perhaps of few rating agencies in the process to avoid any bias views and opinions.
In its submission to the AAOIFI, CIBAFI expressed its appreciation of the work that the AAOIFI does to maintain sound practices of the IFSI.
In addition to policy and regulatory advocacy, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialised research and publications, and comprehensive professional development programmes.