A further initiative during the same year was the introduction of the Islamic Financial Stability Forum (IFSF), set up in 2010 to further solidify the global efforts in areas that will contribute towards safeguarding financial stability. Deliberations on wide ranging issues that pertain to risks to financial stability in the Islamic financial system have taken place at this forum. Greater awareness on issues relating to regulation and supervision of Islamic finance have also been raised at international meetings, conferences, seminars, workshops and other dialogues that have been organised by the IFSB in many countries across several continents. BIS central bankers’ speeches  1  The initiatives and milestones achieved by the IFSB have indeed paved the way for jurisdictions across the globe to build a solid foundation for the progressive growth of Islamic finance that is underpinned with stability. Additionally, the early recognition by the IFSB of the increasing interconnectivity in a financial system, the IFSB, unlike other prudential standard setting bodies, has advanced its mission through the development of prudential standards for a broader coverage that includes the banking, capital market and insurance or takaful sectors. The prudential standards issued by the IFSB takes into account the specificities of Islamic finance and the dynamics of the various Shariah contracts used in the wide ranging products offered by Islamic financial institutions. It is within this context that Islamic financial institutions are able to perform its role more effectively as financial intermediaries that are differentiated from its conventional counterparts.
It is encouraging that to date, eight Islamic banks are offering investment accounts to their customers. More are expected to follow when the value proposition of such investment accounts, with its unique features and the different target market become better understood. The industry-led communication by the Association of Islamic Banking Institutions Malaysia will contribute towards increasing the awareness of customers on the concept and on the key features of investment account. The latest establishment of a consortium developed by four Islamic banks to develop and operate the IAP which is to be launched next month is also another initiative to advance this new offering. In the development of the investment account, it will be essential for Islamic banks, investors and entrepreneurs to embrace the different approaches in the management of the risk and return relationships that are embedded in the variations of the Shariah contracts used in such investment accounts. These relationships need to be well understood by the parties involved and which are aligned with clear contractual and operational requirements. The IFSB has an important role in not only providing guidance but also in initiating the convergence of the different practices between IFSB members with regard to the treatment of the investment account – also referred to as profit sharing investment account (PSIA) – in the IFSB standards. More in-depth work can also be explored by the IFSB on the prudential requirements for the investment account to further ensure a conducive environment for such risk-sharing offerings.