• 20 Mar

    PRESS RELEASE: 20th March 2018, Manama, Kingdom of Bahrain

    CIBAFI Submitted Recommendations to the Basel Committee on Banking Supervision (BCBS) on Stress Testing Principles


    20th March 2018, Manama, Kingdom of Bahrain | Aligned with its role as advocate of the Islamic Financial Services Industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has provided its comments on 20th March 2018 to the Basel Committee on Banking Supervision (BCBS) on the Consultative Document on “Stress Testing Principles”.

    The Consultative Document has been issued on 20th December 2017 and is open for public consultation until 23rd  March 2018.  CIBAFI thanked the BCBS for giving the opportunity to the Islamic Financial Services Industry to comment on the Consultative Document. CIBAFI has provided collective feedback of its member banks from more than 30 jurisdictions, comprising the following key points.

    Firstly, the Principles have been “formulated with a view towards application to large, internationally active banks … in Basel Committee member jurisdictions”, but are intended to be used on a proportionate basis by smaller banks and their supervisors in all jurisdictions. Some CIBAFI members would like to see the BCBS provide more clarification on the regulators’s role in such application and the application of the principles by smaller banks to assist less sophisticated supervisory authorities and smaller banks in their implementation. 

    Secondly, in addition to stating the high-level principles, the BCBS is planning to publish descriptions of stress testing practices. CIBAFI members welcome this, and believe that it will be particularly helpful to smaller banks and less sophisticated supervisory authorities. The Committee may take into consideration in its further publications not only the application to smaller banks in non-member jurisdictions, but also (i) different stress testing methodologies and scenarios to be adopted for each of the risk silos; (ii) guidance on the choice of macroeconomic parameters in scenario-setting, and (iii) guidance on an appropriate frequency for testing and review in particular contexts.

    Finally, the Committee has published its “range of practices”  report, which describes and compares supervisory and bank stress testing practices and highlights areas of evolution. CIBAFI members have suggested that the Committee should include the testing of Islamic banks in its future reports with the stress test methodologies and results of the Islamic Banking sector separately. Moreover, some CIBAFI members highlighted that IFIs have specific risks, different ranges of stress testing scenarios and severities which raise particular concerns and challenges in using these principles. The BCBS may take into consideration certain specificities of IFIs in its further guidelines and publications. 

    In its submission to the BCBS, CIBAFI expressed its appreciation of the work that the BCBS does to maintain sound practices of the Financial Services Industry.  

    Full comments to the BCBS are available on CIBAFI website http://www.cibafi.org 

    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 specialized publications and comprehensive professional development programmes. 


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