KARACHI, April 16: The State Bank of Pakistan has formulated draft risk management guidelines for Islamic banking institutions (IBIs) to further strengthen the regulatory framework in the area of risk management.

These draft guidelines are based on the ‘guiding principles of risk management for Islamic financial institutions’ issued by the Islamic Financial Services Board (IFSB), which is an international-standard setting body of regulatory and supervisory agencies.

The SBP is a founding member of IFSB and its representatives on technical committee and working group have actively contributed to preparation of the guiding principles.

“Keeping in view the current SBP regulatory framework in the area of risk management, IFSB guiding principles on risk management have been tailored for Pakistani market,” said a circular issued by the SBP on Monday.

However, these guidelines will be in addition to various risk management guidelines issued by the SBP from time to time and IBIs will be required to comply with both sets of guidelines.

These guidelines will further complement and enhance the current risk management regime of the SBP by identifying and suggesting technique to manage various types of risks unique to Islamic banking institutions.

The draft guidelines have been sent to key stakeholders, including the Pakistan Banks’ Association and Islamic Banking Institutions for comments and feedback by May 5, 2007.