Consolidation and convergence key to success of Bahrain’s implementation of sharia-compliant Basel II

Al Sadah also emphasised that procedures and regulation across sharia-compliant banks need to converge for success on the international stage. “The regulators, the auditors, the standard-setters and the Islamic institutions have a mutual interest in continuing development of a well-governed and sound Islamic financial services industry,” he said.

Working closely with the Islamic Development Bank (IDB), the industry and the Audit Organization for Islamic Banks (AAOIFI), the BMA created the Prudential Information and Regulation for Islamic banks (Piri) regulatory framework in 2001. Under the Piri framework, regulators have been preparing for Basel II implementation rules, due to be finalised by the end of this year. 

Al Sadah noted the need to strengthen Pillar II principles, and advocated that institutions follow AAOIFI governance standards. “The role of sharia boards needs to be further developed by applying greater and more effective governance standards…Sharia judgements (or Fatwas) are as important to Islamic finance as accounting standards or legal opinions. That is why we support the role of AAOIFI’s sharia board in harmonising the Fatwas of individual banks,” Al Sadah said to the audience at the 8th AAOIFI conference on Islamic banking.

BaselAlert.com