15 July 2020, Manama, Kingdom of Bahrain, Basel, Switzerland | Aligned with its role as an 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 submitted to the Financial Stability Board (FSB), updates on the matter of “Correspondent Banking”.

Correspondent Banking represents an essential issue to CIBAFI members, few of whom have a global reach, and most of whom are in emerging or developing markets. They largely depend on relationships with other banks to be able to provide basic international services to their customers. However, because of the countries in which they are based, some have suffered particularly from de-risking by foreign banks.

In previous communications to the FSB, CIBAFI highlighted the decline in Correspondent Banking Relationships (CBR) experienced by Islamic financial institutions as revealed by the Global Islamic Bankers’ Survey (GIBS) 2019. This year, CIBAFI updated this information based on the 2020 survey, which reflects the views of over 100 CEOs from Islamic banks in 35 jurisdictions.

CIBAFI’s GIBS 2020 revealed that the level of urgency of this agenda has further declined this year; de-risking risk moved from the sixth most significant risks to the tenth ranking within CIBAFI’s risk dashboard. This year, the region where the most considerable decline had occurred is North Africa. A total of 38% of Islamic banks from North Africa region reported a “significant decline” in CBR, which means that the majority of respondents have experienced adverse effects as a result of de-risking over the last year. CIBAFI GIBS 2020 Report was launched in 16th June 2020 and will be available for download soon.

Although the results show that its severity seems to be easing, the decline in correspondent banking remains an issue which could impact severely on some Islamic financial institutions. CIBAFI therefore very much welcomes the priority which it continues to hold on the international agenda and expresses its appreciation of the work that the FSB does to maintain sound practices of the financial services industry.