CHAPTER 6Regulatory Aspects of the Islamic Capital Market and Basel III Requirements
By Musa Abdul-Basser
In the wake of the 2008 global economic and financial crisis, the Basel Committee on Banking Supervision (the Basel Committee) engaged in a massive and concerted effort to strengthen global capital and liquidity rules, with the overall objective of promoting great resilience in the banking sector. Although there would be subsequent revisions and clarifications, in 2010 the Basel Committee released its baseline document, Basel III: A global regulatory framework for more resilient banks and banking systems (the Basel III framework). This document, along with the Basel Committee's Basel III: International framework for liquidity risk measurement, standards and monitoring (the Basel III liquidity framework), forms the framework guidance for the Basel III regime.1
ELIGIBLE CAPITAL AND CAPITAL INSTRUMENTS
In Islamic capital markets, the standards-setting organisation, the Islamic Financial Service Board (IFSB), has also given essential guidance on Basel III, specifically for institutions offering Islamic financial services (IIFS). For its fundamental capital adequacy guidance, the IFSB promulgated IFSB-2 (Capital Adequacy Standard) in December and more recently IFSB-15 (Revised Capital Adequacy Standard for Institutions Offering Islamic Financial Services [Excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes]) in December 2013, as a ...
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