The body governing prudential standards in global Islamic finance plans to tighten oversight of market practices and revise capital adequacy and disclosure requirements.

The Kuala Lumpur-based Islamic Financial Services Board (IFSB), in its fourth report on financial stability in the sector released Tuesday, said while Islamic finance is expanding globally, the sector has not been immune to spillover effects from a global economic slowdown.

The IFSB said by the end of this year it plans to finalise a guidance note on stress-testing and release a draft for a new disclosure standard for capital market products such as Islamic bonds, or sukuk.

The disclosure requirements would cover financial but also sharia-compliance aspects, and may include guidance on specific sukuk formats such as convertible instruments and those used for regulatory-capital purposes.

Islamic finance is now deemed to have systemic importance in 11 countries, which the IFSB defines as having more than a 15 percent share of the total domestic banking sector.

These include Qatar, Kuwait, Malaysia, Saudi Arabia and Brunei, with the latest entrant Djibouti. Bahrain and Jordan are close to achieving that status as well, the IFSB added.

This has prompted regulators to increase oversight and fine tune tools to support the sector.

For instance, progress is being made in developing sharia-compliant deposit insurance schemes, with Jordan expected to become the fifth country to provide such a safety net to Islamic banks in the near future, the IFSB said.

Jordan's model would be based on Islamic insurance contracts, an approach similar to the one used by Bahrain and Sudan.