04 November 2020, Manama, Kingdom of Bahrain |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 its
comments on 04th November 2020 to the Basel
Committee on Banking Supervision (BCBS). The submission included comments on
the Consultative Documents (CDs) on “Revisions to the principles for the sound
management of operational risk” and “Principles for operational resilience”.
The Consultative Documents have been issued on 6th
August 2020 and were open for public consultation until 6th November
2020.
In its comments, CIBAFI thanked the BCBS for giving
the opportunity to the Islamic Financial Services Industry to comment on the
CDs and provided collective feedback of its member banks from over 34 jurisdictions.
CIBAFI comments comprised the following key points.
Revisions to the principles for the sound management
of operational risk
First: on the strong risk
culture, the implementation of a code of conducts/ethics and significance of
training programmes, the CD should provide guidance on the structure, role and
responsibilities of the senior ethics committee or other board-level committees. It should also provide recommendation on the suitable
training programmes for the board of directors (BOD)
and senior management.
Second: regarding operational
risk appetite and tolerance statement (including its establishment, review and communication),
CIBAFI recommended expanding the text of Principle 4 in order to ensure that it
covers all the points on the content of the risk appetite and tolerance
statement that have been made in Principle 2.
Third: it
is recommended to incorporate the training aspects of the bank’s staff, in the newly
added Principle on the Information and Communication Technology (ICT), to
ensure that they are capable to deal with new trends in technology and therefore
can implement robust ICT governance that is consistent with bank’s risk
appetite and tolerance statement for operational risk.
For more details of these comments, please click here.
Principles for operational resilience
First: regarding the
Principle 1 on utilizing bank’s existing governance structure to establish,
oversee and implement an effective operational resilience approach, the CD
should take into consideration the involvement of governments and policymakers
under special circumstances, such as, a natural disaster, lockdown due to
pandemics or a terrorist incident.
Second: the
CD highlighted the significance of ICT resilience to manage smooth delivery of
the bank’s critical operations. However, some of the recommendations are
primarily managerial rather than technical. To that end, it might be helpful to
have a separate document dealing at greater length with all aspects of
operational risk management in the ICT domain with recognition that the
technologies and their usage are subject to rapid change.
For more details of these comments, please click here.