Authenticity, Innovation and Reach in Islamic Finance
October 26, 2010IMF: Islamic Banks are More Resilient to Crisis?
October 31, 2010BNM mulls 5 Shariah advisors for Islamic banks
By Habhajan Singh Available at: http://islamicfinanceasia.blogspot.com/2010/10/bnm-mulls-5-shariah-advisors-islamic.html
Bank Negara Malaysia (BNM) is mulling at pushing up the number of Shariah comittee members to five from the present three and getting directors more involved in Islamic governance under its wide-ranging proposals on Shariah governance for Islamic banks.
At present, Islamic banks operating on the local turf like Maybank Islamic Bank Bhd, CIMB Islamic Bank Bhd and Kuwait Finance House Malaysia Bhd, are required to have at least three members in their in-house Shariah committee. Each member is not allowed to sit on the Shariah committee board of another Islamic bank, but may sit on the Shariah committee of a takaful operator.
A member of the Shariah Advisory Council (SAC), the Shariah mother-board at the central bank level currently headed by Dr Mohd Daud Bakar, is also not allowed to sit on Shariah committee at the bank level. The measures are partly built in as a firewall to ensure proper governance on the Shariah front.
The central bank is also recommending Islamic financial institutions (IFIs) operating in Malaysia to appoint their respective chairman of Shariah committees onto the board as independent directors. It is understood the Shariah governance recomnmendations drafted by the central bank have been circulated to IFIs for their feedback.
“So far, feedback has been mixed. Some banks may be a little behind the curve on some of the proposals,” said one Islamic finance expert with knowledge of the proposals.
In its latest recommendation, it is understood that BNM is also compelling Islamic banks to ensure that at least three of the five Shariah committee members have Shariah background. It is understood that the requirement is to ensure members are able to fulfil the board’s role, as spelt out in the Islamic Banking Act 1983 and Takaful Act 1984, which is to ensure that all aspects of their bank’s business operations are in accordance with the Shariah principles.
“At the moment, there is no specific requirement. However, in practice, BNM approval is required for the appointment of each and every Shariah committee member. So, invariably, they will ensure that the board is appropriately manned,” said one industry executive.
These proposed changes will mark yet another milestone in the regulation regime in place to govern IFIs which come under the jurisdictions of BNM, especially after the introduction of the Central Bank of Malaysia Act 2009.
In a report on Nov 23, 2009, The Malaysian Reserve noted that an analysis of the new ground rules for the central bank showed a strong Islamic finance flavour running through the 68-page document, especially in empowering of the SAC, designated to be the “authority for the ascertainment of Islamic law for the purpose of Islamic financial business”. On the proposal for Shariah committee chairman to sit on the bank’s board, an industry expert told The Malaysian Reserve that it may raise some issues.
“Some banks have state muftis chairing their Shariah committees. Now, do you want muftis to sit on the boards of Islamic banks?” he asked. Perak mufti Tan Sri Harussani Zakaria, for example, is chairman of Maybank Islamic’s Shariah committee.
At CIMB Islamic, on the other hand, its Shariah committee is headed by Prof Dr Mohammad Hashim Kamali, who is already sitting as an independent director on the bank’s board. Mohammad Hashim is the chairman/chief executive office of Hadhari Institute For Advance Islamic Studies. On the takaful side, MAA Takaful Bhd’s Shariah committee chairman, Dr Mohd Khalil Ruslan from Universiti Malaya’s law faculty, also sits on the company’s board.
Best Regards
ZULKIFLI HASAN
With Dr. Mohamad Daud Bakar at his office in Dubai, a world-renowned Shari’ah scholar from Malaysia
0 Comments
Watch for this eye catching sign ” MUFTI ON BOARD .”
State Muftis in Islamic Bank Boards should be a no. no. Muftis are civil servants and being in the public sector they serve different functions from those in the business and marketing oriented private sectors. With them
ON BOARD ( pun intended ) there will blurring of roles between getting business and making sure the state supervises Islamic businesses.
Islamic banking business through banks in the world, Islam is doing what he could never make their own: to give legitimacy to Sharia law and penetrates the fabric of Western society.In simple Islamic banking is a need for financial products – mortgages have a savings account – the structure is compliant with Shariah the Quran.
Mr Islamic Banking Course,
”mortgages have a savings account ‘
May I know what exactly you are trying to say?