Malaysia Central Bank
Tightens Shariah Rules for Islamic Banks
By Liau Y-Sing
KUALA LUMPUR, March 24 (Reuters) - Malaysia's central bank announced on Wednesday rules to tighten sharia compliance at Islamic banks including raising sharia advisers' accountability and independence, and requiring audits on banks.
Disputes on the compliance of certain products such as a recent case involving Kuwait's Investment Dar (TIDK.KW: Quote, Profile, Research) have put the spotlight on the role of sharia advisers in approving products and their relationship with bank management.
Malaysia's central bank, which oversees the world's largest sukuk market, said Islamic banks must set up sharia review, audit and risk management control functions to reinforce compliance.
"The framework aims essentially to strengthen the sharia governance process, decision-making, accountability and independence," the central bank said in its 2009 annual report.
"To reinforce the sharia compliance functions, internal sharia review and audit requirements will be introduced, supported by an appropriate risk management process and research capability."
The central bank, Bank Negara, said under the rules the board would be responsible for the overall sharia oversight of Islamic banks but must recognise the independence of sharia advisers.
The role of sharia advisers is widened to include ensuring implementation of decisions involving Islamic law and must inform the bank where non-compliance with sharia issues have not been properly addressed.
Islamic financial institutions in Malaysia, which include the units of HSBC (HSBA.L: Quote, Profile, Research), Kuwait Finance House (KFIN.KW: Quote, Profile, Research), Maybank (MBBM.KL: Quote, Profile, Research) and CIMB (CIMB.KL: Quote, Profile, Research), must have review functions that continuously monitor sharia compliance of their operations.
They must also have annual sharia audits which would provide an independent assessment of compliance with established policies, Bank Negara said.
"The senior management is also responsible for ensuring that all submissions to the sharia committee are adequately researched and supported by a thorough study on the sharia issues, product structuring and documentation," it said.
Lawyers have said some banks selectively disclose information to sharia advisers to speed up the approval process for products or push these experts for an endorsement within a short time after supplying them with complicated financial documents.
A recent court case involving Kuwait's Investment Dar and Lebanon's Blom Bank (BLOM.BY: Quote, Profile, Research) has revolved around arguments on the sharia compliance of a certain product, which experts say could leave investors wary of Islamic finance.
Dar has refused to pay Blom Bank $10.7 million, arguing that their original deal involving a wakala or agency arrangement -- which was approved by its sharia board -- fell foul of religious laws.
Dar's charter prohibits it from entering into non-Islamic transactions.
Lawyers say the case has raised several issues including the the level of communication between the bank's board and its sharia advisers.
On its plan to introduce guidelines for a uniform application of popular Islamic financing structures, Bank Negara said it would finalise rules for the ijara, mudaraba, musharaka, istisna and wadiah contracts by end-2010. It had launched rules last year for a standard application of the murabaha structure. for more Islamic finance stories and ISLAMIC for a speed guide) (Editing by Jan Dahinten)
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Comments
1.minta UZAR keluarkn pandangan tentang mata wang syariah dinar & dirham dalam mendepani sistem kewangan yang diguna-pakai sekarang, cabaran dan alternatif solusi.
2. Jika berkesempatan, minta pendapat UZAR dgn pelancaran dinar/dirham di Kelantan sbg matawang alternatif dalam urusniaga. Apa punca masalah dari sudut perundangan, adakah bertentangan dengan polisi Bank Negara Malaysia.
Terima Kasih.
The Shariah Audit MUST BE DONE WITH THE HELP OF COMPETENT AUDITOR... It is not easy to crack down the financial statement...
Management is getting wild , SSB need help, Accounting firm (Big 4) only prefer of making money, the authority dont pay enough attention or choose not to be too strict...
but I am sure that somebody is doing sth good for Shariah Audit.
The atmosphere of current IFI is innovation, convergence of IF and halal hub, fiqh flexibility, and role of IF institution in capturing larger market.
I joined KLIFF 2010. The governance session only touch on Islamic Accounting. No Shariah Audit being discussed. GIFF 2010 should be more focus, so we expect to get sth.
Disini saya ingin bertanya kepada ustaz tentang sahnya akad dalam urusan perbankan Islam:
1. Pegawai bukan Islam bagi pihak bank melaksanakan akad
2. Akad dengan hanya menandatangan borang akad tanpa diisi perkara-perkara seperti nama, jumlah pembiayaan dan seumpamanya.
3. Akad tanpa lafaz antara kedua pihak dangan nyata sebelum tandatangan borang akad.
Saya rasa pihak audit ini nanti perlu membuat kajian terhadap tatacara perlaksanaan akad dan urusan perbankan supaya ia tidak tersasar daripada tuntutan Islam.
UZAR : DAH JWB DI FACEBOOK dan memng betul aduit memang semak semua tu.
Will this audit being done by the syariah advisors or the external auditor that being appointed..In my concern (if i'm not mistaken), currently, the external auditor only rely on the shariah report done by the shariah advisor..
Besides, on this shariah auditng, are the shariah advisor@externa l auditor capable to do that and what actually the scope of audit that will be done...This is my opinion- This is because if this shariah audit being done by the shariah advisor, I think the independent of the shariah advisor can be question because it is such they will audit their on work after they approved and give advice in the product development.Besides, they also need to understand deeply about the accounting transaction, the auditing scope so that the shariah auditint can be done throughly.
In addition, if this shariah auditing being done by the external auditor, they must know deeply all things about the Islamic Banking products, how it apply, the transactions, the operation of the product because as the uniqueness that this product have.Besides, will this also cover the disclosure requirement that need to be done.Currently, in my concern there is no Islamic bank have done the shariah audit..And which standard that the external auditor or the shariah advisor will use.I also want to know, is there any initiative done by the shariah advisor to suggest to the Islamic bank in Malaysia to follow any relevant standard like AAOIFI that i believe have deep and proper disclosure suggested by them that really useful to the user of the annual report(financia l statement and shariah report)..All of this matter is based on my own opinion..
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