HC-9 HC-9 The Principles of Islamic Shari'a
HC-9.1 HC-9.1 Principle
HC-9.1.1
Banks which refer to themselves as "Islamic" must follow the principles of Islamic Shari'a.
October 2010HC-9.2 HC-9.2 Governance and Disclosure Per Shari'a Principles
HC-9.2.1
Islamic bank licensees which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders.Islamic bank licensees which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles. In ensuring compliance with Shari'a principles, eachIslamic bank licensee must establish an independent Shari'a Supervisory Board consisting of at least three Shari'a scholars and complying with AAOIFI's Governance Standards for Islamic Financial Institutions No.1 and No.2.October 2010HC-9.2.2
The Board shall set up a Corporate Governance Committee (see also Chapter HC-8). In this case, the Committee shall comprise at least three members to co-ordinate and integrate the implementation of the governance policy framework.
October 2010HC-9.2.3
In addition to its duties outlined in Chapter HC-3 and Appendix A, the Audit Committee shall communicate and co-ordinate with the
Islamic bank licensee's Corporate Governance Committee and the Shari'a Supervisory Board ("SSB") (where applicable) to ensure that information on compliance with Islamic Shari'a rules and principles is reported in a timely manner.October 2010HC-9.2.4
The Corporate Governance Committee established under Chapter HC-9 shall comprise at a minimum of:
(a) Anindependent director to chair the Corporate Governance Committee. The Chairman of the Corporate Governance Committee should not only possess the relevant skills, such as the ability to read and understand financial statements, but should also be able to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the Audit Committee;(b) A Shari'a scholar who is an SSB member for the purpose of leading the Corporate Governance Committee on Shari'a-related governance issues (if any), and also to coordinate and link the complementary roles and functions of the Corporate Governance Committee and the SSB; and(c) Anindependent director who can offer different skills to the committee, such as legal expertise and business proficiency, which are considered particularly relevant by the Board of directors for cultivating a good corporate governance culture, and deemed "fit and proper" by the CBB.October 2010HC-9.2.5
The Corporate Governance Committee shall be empowered to:
(a) Oversee and monitor the implementation of the governance policy framework by working together with the management, the Audit Committee and the SSB; and(b) Provide the Board of directors with reports and recommendations based on its findings in the exercise of its functions.October 2010HC-9.2.6
All Islamic Bank Licensees must comply with all AAOIFI issued accounting standards as well as applicable Shari'a pronouncements issued by the Shari'a Board of AAOIFI. The Islamic Bank Licensee must have a separate function of Shari'a review to verify compliance with the above. The internal Shari'a review must be carried out in accordance with AAOIFI governance standard No.3. The Shari'a review function may be located in the Internal audit function of the Islamic Bank Licensee.
October 2010
