Manama (UNA-OIC) – 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 today 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 conduct/ethics and the significance of training programs, 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 recommendations on suitable training programs for the board of directors (BOD) and senior management.
Second: regarding the 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.
Principles for operational resilience
First: regarding 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 the 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 a recognition that the technologies and their usage are subject to rapid change.
In addition to policy and regulatory advocacy, CIBAFI continues to support the Islamic Financial Services Industry 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 training programs.