The Islamic Financial Services Board (IFSB) is consulting, until June 23, 2022, on an exposure draft of the revised Sharīʻah governance framework for institutions offering Islamic financial services.
The draft standard sets out the following revised set of guiding principles on the key components of a sound and effective Sharīʻah governance framework for institutions offering Islamic financial services:
- An institution must have in place a comprehensive Sharī`ah Governance Framework that encompasses a set of institutional and/or system-wide arrangements for the effective and independent oversight of Sharī`ah compliance of its products and services, processes, and business operations.
- The Regulatory and supervisory authorities shall have adequate understanding of Sharīʻah noncompliance risks and accordingly ensure that the institutions have in place an adequate and effective Sharīʻah Governance Framework and reporting mechanism.
- Regulatory and supervisory authorities and/or governments are strongly recommended to establish and appropriately empower Central Sharīʻah Boards to harmonize Islamic banking and finance practices in the jurisdiction, in line with Sharīʻah principles and rules.
- An institution must ensure that its Sharīʻah governance framework includes, at a minimum, Sharīʻah Supervisory Board, Sharīʻah Compliance Function, Internal Sharīʻah Audit Function, and Independent External Sharīʻah Audit.
- An institution must clearly define the roles and responsibilities of its Board of Directors, Senior Management, and others toward upholding the Sharīʻah compliance of its activities and operations.
- An Islamic Window of a Conventional Financial Institution must have a suitable Sharīʻah governance framework in place to ensure effective Sharīʻah compliance of its operations.
- An Islamic subsidiary/affiliate of a Conventional Financial Institution must have a suitable Sharīʻah governance framework in place to ensure effective Sharīʻah compliance of its operations.
- An institution is responsible to ensure that it prudently recognizes any additional considerations or exceptional circumstances that may require it to apply proportionality and/or other considerations toward implementation of the principles of this standard.
- An institution shall be transparent in its Sharīʻah governance to its shareholders, customers, other relevant stakeholders, and market participants.
This draft standard applies to institutions offering Islamic financial services in the Islamic banking, Islamic insurance, and Islamic capital market sectors. Regulatory and supervisory authorities may choose to apply this standard to other institutions offering Islamic financial services in their jurisdictions. The standard adopts a principle-plus-rule approach that provides a comprehensive set of Sharīʻah governance practices for implementing each principle.
Keywords: International, Banking, Securities, ESG, Governance, Islamic Finance, IFSB, Insurance, Islamic Banking
Previous ArticleFCA to Open Second Phase of Digital Sandbox for ESG Solutions
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.