Disclosures to Promote Transparency and Market - IFSB

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4.3 Frequency and Timeliness 16. Disclosures of a periodic nature set out in this Standard shall be made on a semi-annual basis (consistent with Pillar 3), subject to the following exceptions. Qualitative disclosures that provide a summary of risk management objectives, principles and policies adopted by an IIFS shall be published on an annual basis. Risk-sensitive information on IIFS, such as Tier 1 capital, total capital, and capital adequacy ratios and their components, 9 shall be disclosed on a quarterly basis. Product- or retail investororiented disclosures not periodic in nature but linked to the introduction of new products or modifications to existing products shall be published on a timely basis. 17. In all cases, material information shall be published as soon as practicable while meeting the deadlines set by the disclosure requirements of the supervisory authorities. 4.4 Proprietary and Confidential Information 18. Proprietary information encompasses information that is competition sensitive and, if shared, would jeopardise an IIFS’s competitive position. This has an impact on the level of disclosure of an IIFS’s customer base, details of internal arrangements or methodologies adopted by the IIFS. This Standard adopts the view that an appropriate balance needs to be achieved between the desirability of meaningful disclosure and the protection of proprietary and confidential information. 19. In circumstances where a particular detailed disclosure might significantly jeopardise the position of the IIFS, a more general but adequately informative disclosure would be appropriate, subject to supervisory discretion. For example, in a case where proprietary rights or interests are not adequately protected by available laws, levels of disclosure of information pertaining to such rights or interests may have to be limited. This limitation is not intended to conflict with the disclosure requirements under the relevant international accounting standards or relevant national requirements. 9 Components of Tier 1 and total capital ratios are noted in Table 2, on capital structure disclosures, presented in Section 2.3. 4
SECTION 2: FINANCIAL AND RISK DISCLOSURE PRINCIPLES 1. General Disclosure Principles 20. IIFS shall have a formal disclosure policy, which is approved by their board of directors. The disclosure policy will address the IIFS’s approach for determining what disclosures it will make and the internal controls over the disclosure process. In addition, IIFS shall implement a process for assessing the appropriateness of their disclosures, including validation and frequency. 21. The establishment of a Governance Committee, 10 as a body with the responsibility to oversee governance issues relating to IAH, can help to enhance the transparency of returns and risks and of the underlying factors that affect them. 22. The scope of disclosure shall be commensurate and consistent with the risk assessment and risk management objectives, policies and practices of the IIFS. 11 23. In a manner consistent with, and complementary to, other IFSB standards (such as those on corporate governance and risk management 12 ), this standard shall focus on financial, risk and governance disclosures to enable market participants to assess the different categories and the overall level of risk in IIFS, the extent of risk-sharing and DCR borne by shareholders, the practice of smoothing of returns on profit-sharing investment accounts (PSIA) and the resultant risk-return mix for IAH. 24. Such disclosures can address one of the fundamental issues in risk management in Islamic finance, which is the recognition and measurement of risks associated with PSIA, where IIFS commingle the funds of unrestricted IAH with their own (shareholders’) funds. This Standard places particular emphasis on retail investor-oriented disclosures of risks, as well as returns to IAH. 25. IFSB also recognises the differences that exist within the disclosure framework among countries, and the varying levels of compliance among the IIFS under their jurisdictions. Notwithstanding the obligation of IIFS to comply with their national regulatory framework, this Standard is intended to enhance the level of transparency through disclosures based on international accounting and auditing standards, thus narrowing the gap in disclosure practices. In cases of differences or conflicts between the national regulatory framework and the IFSB standards, the supervisory authorities need to find ways of harmonising such differences or resolving the conflicts. 26. Recommended disclosures are presented below for the scope of inclusion in the disclosures for an individual IIFS, its capital structure, capital adequacy, investment accounts (including specific disclosures on unrestricted investment accounts and restricted investment accounts), risk management, categories of risk, general and Sharī`ah governance arrangements, consumer-friendly disclosures for retail IAH and the treatment of Islamic windows. For each category listed above, tables are presented showing both qualitative and quantitative disclosures, and highlighting key elements that shall be disclosed. A definition of Islamic windows for the purpose of these principles is 10 The establishment of a Governance Committee is recommended in the IFSB’s Guiding Principles on Corporate Governance for Institutions Offering only Islamic Financial Services (excluding Islamic Insurance (Takāful) and Islamic Mutual Funds). 11 The risk assessment practices of an IIFS would reflect its size and nature of operations. 12 IFSB, Guiding Principles of Risk Management for Institutions (other than Insurance Institutions) Offering only Islamic Financial Services, December 2005. 5
Page 1 and 2: ISLAMIC FINANCIAL SERVICES BOARD DI
Page 3 and 4: COUNCIL MEMBERS* H.E. Rasheed Moham
Page 5 and 6: TABLE OF CONTENTS ACRONYMS ........
Page 7 and 8: Bismillahirrahmanirrahim Allahumma
Page 9: these assets in the capital adequac
Page 13 and 14: Quantitative Disclosures 4. The agg
Page 15 and 16: subject to a capital requirement, d
Page 17 and 18: 38. IIFS shall make disclosures of
Page 19 and 20: Table 6: Restricted Investment Acco
Page 21 and 22: of the funds. These disclosures sha
Page 23 and 24: Table 7: General Disclosures Genera
Page 25 and 26: 1.2 Credit Risk Mitigation 52. IIFS
Page 27 and 28: 1.4 Market Risk 55. Market risk is
Page 29 and 30: 1.6 Rate of Return Risk 59. “Rate
Page 31 and 32: Table 14: Displaced Commercial Risk
Page 33 and 34: SECTION 6: GENERAL GOVERNANCE AND S
Page 35 and 36: SECTION 7: TREATMENT OF ISLAMIC WIN
Page 37 and 38: 1.1 Internationally recognised acco
Page 39 and 40: 1.5 Robust legal and institutional
Page 41 and 42: DEFINITIONS The following definitio

Disclosures to Promote Transparency and Market - IFSB

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