Bank of Korea joins Islamic Financial Services Board

Seoul – South Korea’s central bank has joined the Islamic Financial Services Board (IFSB), one of the main standard-setting bodies for Islamic finance, as regulators across Asia build closer ties to the growing industry.

Guidelines issued by the Kuala Lumpur-based IFSB are gaining prominence as the industry takes a greater share of the banking sector in several majority-Muslim countries and expands into new markets. The Bank of Korea is the 59th regulatory body to join the IFSB, bringing total membership to 184, joining the likes of the central banks of Luxembourg and Japan and the monetary authorities of Hong Kong and Singapore. The move could augur stronger links between South Korea and Islamic finance hubs in Southeast Asia.

South Korea’s Export-Import Bank of Korea already has a bond program in Malaysia that can issue Islamic bonds, or sukuk, although it has yet to tap the market. This week, Hong Kong lawmakers passed a bill that will allow the AAA-rated government to raise around $500 million via sukuk, or Islamic bonds. In a separate statement, the IFSB also adopted a revised guideline on the supervision of Islamic finance institutions, helping tighten regulatory oversight of industry practices. The latest update complements stricter Basel rules, agreed globally to make banks safer after the 2007-09 credit crisis. In the past two years, the IFSB has issued separate guidelines on liquidity risk management, stress testing and capital adequacy.