IFSB
The IFSB, the Islamic Financial Services Board, is a Kuala Lumpur-based international body that issues prudential and supervisory standards for Islamic banking, Islamic capital markets and takaful, much as the Basel Committee does for conventional banks.
Also called: Islamic Financial Services Board
The IFSB began operating in the early 2000s, and its members are mainly central banks, financial regulators and other public bodies, alongside market participants. Its standards cover capital adequacy, risk management, liquidity, corporate and Sharia governance, disclosure and supervisory review, adapted to the risks that Islamic contracts create — for example the profit-sharing investment accounts that sit between debt and equity on a bank's balance sheet.
Regulators implement IFSB standards through their own rules, so the IFSB itself does not license or supervise any institution. Its work matters most to those designing a regulatory framework for Islamic banking or takaful, or assessing how a jurisdiction treats it.
In practice
The IFSB does not issue Sharia rulings on products, and its standards bind no one directly. They take effect only when a member regulator adopts them.
Commonly confused with
| Term | How it differs |
|---|---|
| AAOIFI | AAOIFI sets Sharia, accounting and governance standards for institutions. The IFSB sets prudential and supervisory standards mainly for regulators. |
See also
- AAOIFIAAOIFI, the Accounting and Auditing Organization for Islamic Financial Institutions, is a Bahrain-based international standard-setter whose Sharia, accounting, auditing, governance and ethics standards are widely used in Islamic finance.
- Sharia Supervisory BoardA Sharia Supervisory Board is the panel of scholars responsible for reviewing and overseeing an Islamic financial institution's compliance with Sharia — approving products and contracts, issuing rulings and reviewing whether operations follow them.
- Sharia Non-Compliance RiskSharia non-compliance risk is the legal, financial and reputational risk an Islamic financial institution faces if it fails to comply with the Sharia rules that apply to it — through a flawed product, a contract executed out of sequence or income it cannot keep.
- TakafulTakaful is a cooperative risk-sharing arrangement in which participants contribute to a common fund that pays claims among them, run by an operator under a Sharia-compliant contract rather than sold as conventional insurance.