An executive director at Bahrain's central bank, Khalid Hamad, made a surprising statement recently: "The moment it [use of IFSB standards] becomes mandatory then it will serve the purpose better". Currently Islamic financial institutions that are members of the IFSB will ensure they remain in compliance with the prudential and guiding principles to support stability in the Islamic financial industry.
Perhaps the most surprising thing about this support for making IFSB standards mandatory was its source. AAOIFI, another standards setting body focusing on accounting and auditing, is based in Bahrain while IFSB is based in Kuala Lumpur, Malaysia. As a result, GCC central bankers and regulators--particularly within Bahrain--have typically lent their support for AAOIFI standards, although in many cases, there has been a resistance to making the standards mandatory across borders (several countries' regulators require compliance with AAOIFI standards, but others do not).
The endorsement of IFSB standards by an executive director at Bahrain's central bank represents a shift and may mark the failure by AAOIFI to broaden its mandate beyond accounting and auditing standards (primarily adopting the international standards for Islamic financial institutions). Several years ago, AAOIFI was considering expanding its role to include investigating breaches of Shari'ah-compliance by member institutions, but the effort appears to have fizzled out.
On another front, IFSB has been much more savvy about the visibility of its standards. Whereas AAOIFI releases standards in hard copy form only (to generate the organization revenue), IFSB standards are available online, something which is exceedingly important in order to provide transparency for the general public. AAOIFI's business model and historical focus in accounting and auditing standards has hampered its ability to shift into new areas, which may explain the decision by an executive director at Bahrain's central bank to support making IFSB mandatory.
Perhaps the new acceptance of IFSB over AAOIFI will push the latter to make changes to how it works, in particular, releasing its standards more widely. It is all well and good to have standards for Islamic financial institutions and very few people are likely to be interested in sitting down and reading multi-volume books about the intricacies about accounting treatment of ijara. But in other areas--particularly Shari'ah standards--the general public and other people who are interested by don't own the dead tree version of the standards should be able to read the standards. It will promote greater understanding of how the industry works. IFSB realizes this and it appears to have given them a leg up in growth looking towards the future.