Kuala Lumpur: The Kingdom of Bahrain is among the 15-countries who will get the Islamic Financial Services Board’s (IFSB) set of indicators on the financial soundness and growth of the Islamic banking systems. This initiative is in line with Article 4 of the IFSB Articles of Agreement, which mandates the IFSB to establish a global database of the Islamic financial services industry.
The indicators, called Prudential and Structural Islamic Financial Indicators (PSIFIs), are the first set of internationally comparable measures of the soundness of Islamic banking systems. The PSIFIs capture information on the size, growth and structural features of Islamic banking systems and on their macro prudential condition by looking at measures of their capital, earnings, liquidity, and exposures to various types of risks. They also cover the indicators on capital adequacy and liquidity based on newly issued IFSB Standards to complement international regulatory reforms under the Basel III regime.
The indicators are part of an international effort involving the IFSB and other organisations to construct a comprehensive picture of activity in the Islamic financial services industry. Due to rapid growth and significance of Islamic finance in many jurisdictions, such information is increasingly needed to understand the structure, soundness, and growth of the Islamic finance component within the entire financial systems.
The PSIFIs thus provide statistics that are useful to financial sector supervisors and policy-makers; fund providers and investors; academics and researchers; international financial press and media as well as the general public. Many of the PSIFIs are parallel to the widely used IMF Financial Soundness Indicators (FSIs) on the strength or vulnerabilities of financial systems, but are customised to the specific characteristics of Islamic banking. As such, they will serve to highlight the role of Islamic banking within national economies and permit comparisons between the conventional and Islamic banking systems.
PSIFIs cover aggregated data of Islamic banking institutions at the country level, compiled by the regulatory and supervisory authorities (RSAs) of the participating countries. The data are separately provided on stand-alone Islamic banks and Islamic windows of conventional banks in jurisdictions where available.
The PSIFIs will be regularly collected on a quarterly basis from the participating countries. This press release covers data from 15 of the 16 countries that have agreed to participate in the data compilation exercise. These countries include Afghanistan, Bahrain, Bangladesh, Brunei, Egypt, Indonesia, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Sudan, and Turkey.
The PSIFI Database currently represents PSIFI data as of December 2013. Data are provided for various types of prudential indicators (PIFI) covering capital adequacy, leverage, nonperforming financing, earnings, liquidity, and foreign currency exposure as well as structural indicators (SIFI) focusing on items such as number of branches, employees, and size of total assets, funding and financing portfolios. The database also includes metadata which provides information on the design and specifications of data elements.
“The launching of the IFSB database represents an important milestone in the ongoing transformation of Islamic finance into a globally significant undertaking,” the Secretary General of the IFSB, Jaseem Ahmed, said.
“I am pleased to acknowledge that the IFSB PSIFIs project has benefitted from the Technical Assistance from both the Islamic Development Bank and Asian Development Bank (ADB) over the years. The current phase of the project is being undertaken with a Technical Assistance from the ADB.”