Disclosures to Promote Transparency and Market - IFSB

1.3 Liquidity Risk
53. Liquidity risk is the potential loss to IIFS arising from their inability either to meet
their obligations or to fund increases in assets as they fall due without incurring
unacceptable costs or losses. 43
54. An IIFS shall make disclosures regarding its liquidity management framework, on
an overall basis, and separately, by categories of funding and financing. The
recommended disclosures are set out in Table 10.
Table 10: Liquidity Risk
Qualitative
Disclosures
Quantitative
Disclosures
1. A summary of the liquidity risk management framework in
addressing risk exposure for each category of funding as well as
on an aggregate basis:
• current accounts;
• unrestricted investment accounts; and
• restricted investment accounts.
2. General information on policies to address liquidity risk , taking
into account the ease of access to Sharī`ah- compliant funds
and diversity of funding sources.
3. Indicators of exposures to liquidity risk such as short-term
assets to short-term liabilities, liquid asset ratios or funding
volatility. 44
4. Maturity analysis of financing and various categories of funding
(current account, unrestricted investment account and restricted
investment account) by different maturity buckets.
43 As defined in the IFSB’s Guiding Principles of Risk Management, December 2005.
44 “Funding volatility” refers to sensitivity of depositors, investment account holders and creditors to events
that may undermine confidence and result in rapid withdrawal of funds. Funding volatility can be measured
by a variety of balance sheet indicators, such as liquid assets to overall funding, or volatile liabilities net of
liquid assets to total illiquid assets, and by using cash flow estimates at various maturities, if such estimates
were available.
20