|Mian Muhammad Nazir|
The IBC is mandated to suggest a shariah governance structure at the Central Bank which will provide the regulatory support to Islamic financial institutions (including Islamic windows) through setting up an Islamic banking department at the Central Bank of UAE. Most likely the shariah governance structure at the Central Bank will essentially follow an improved form of any of the existing models. This involves, among other things, establishing a shariah supervisory board at the Central Bank to oversee the overall regulation of the Islamic financial institutions. In proposing a suitable governance structure, particularly recommending a shariah supervisory board at the Central Bank, the Emirates Bankers Association would certainly be endeavouring to reconcile the mandatory provisions of Federal Law No 6 of 1985 and the precedents of having a shariah supervisory board at the central banks.
Federal Law No 6 of 1985 necessitates a higher shariah authority under the Ministry of Justice and Islamic Affairs to oversee the operations of Islamic financial institutions from a shariah compliance perspective, whereas the contemporary practices in other countries, where Islamic financial institutions have received significant popularity as compared to their conventional counterparts, indicate that shariah governance should primarily be the prerogative of the relevant regulator that governs and oversees the industry.
While the Islamic banking industry awaits the recommendations of the IBC, it is anticipated that the IBC would consider suggesting a shariah governance model that paves the way for standardisation, consumer protection and growth of the Islamic banking and finance industry rather than proposing something that results in adding another layer of governance for the sake of formality and precedents.
Mian Muhammad Nazir