The General Council for Islamic Banks and Financial Institutions (CIBAFI) said treatment of real estate across Islamic finance jurisdictions still reflected Basel II or pre-reform Basel III rules.
Bahrain-based CIBAFI has called on regulators overseeing Islamic banking to revise guidance on real estate exposures to align with the post-financial crisis capital rules of Basel III, reported Reuters.
The amended version of Basel III, finalised in December 2017, introduced additional requirements including concentration limits and independent asset valuations.
In a statement, CIBAFI stated that the new requirements are important for Islamic banks as many have high exposure to real estate in both their investment and financing activities, coupled with the illiquid as well as cyclical nature of the asset class.
Islamic commercial banks are estimated to hold more than $1.3 trillion in assets globally.
CIBAFI said national regulators must incorporate the Basel III revisions, while the Malaysia-based Islamic Financial Services Board (IFSB) should also revise its own capital adequacy standard for Islamic banks.