The Islamic finance industry needs to come up with a set of standards that reflect the economic reality of the Islamic transaction rather than the money market price, Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj has urged.
He was speaking during the opening of the 20th Annual Sharia Board Conference of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), a Bahrain-based standard-setting body.
Taking place at the Gulf Hotel Bahrain Convention and Spa the two-day conference has keynote speeches in addition to a number of panel discussions with renowned Sharia scholars, policymakers, decision-makers, leaders and other experts in the Islamic finance industry.
Mr Al Maraj said implementation of risk-free benchmark rates replacing Libor is of interest to the Islamic finance industry.
“I believe it is time for the industry to try to address one of the strongest and most common criticisms from the public about the use of traditional benchmark rates for Islamic transaction pricing. It is admittedly more complex and subtle than just using a money market reference price but it is the right thing to do.”
The CBB Governor said he was pleased to note that AAOIFI and the International Islamic Financial Market and the Islamic Financial Services Board have already started working on the project.
Welcoming the collaboration between AAOIFI and the Islamic Financial Services Board for a comprehensive common standard on Sharia governance, Mr Al Maraj hoped for similar joint projects in the future.
“I hope that the revised common standard incorporates market best practices in Sharia governance and will significantly raise the level of governance for the industry,” he added.
The regulatory official also called on AAOIFI to do more to help central banks implement Sharia standards.
“There must be a well-thought-out implementation mechanism or process of AAOIFI. We suggest to the members of the Sharia Board, many of whom are present today, that they take the time to listen carefully to the industry and understand their concerns and address them according to professional principles and fundamentals without compromising the purposes of Islamic law,” Mr Al Maraj said.
“Also, it is equally important that the authority allow sufficient transition time for the industry to adopt the newly issued standards without undue disruption in the market.”
More than 35 speakers were part of the six panel discussions in addition to the opening ceremony. The chief guests at the conference included the chairman of AAOIFI Shari’ah Board, Sheikh Mufti Muhammad Taqi Usmani, Governor of Central Bank of Bahrain, H.E. Rasheed Mohamed Al Maraj; Governor of Palestine Monetary Authority, H.E. Dr. Feras Milhem and chairman of Libyan Capital Market Authority (LCMA), H.E. Mahmoud Mohamed Wafa. The speakers included Shari’ah scholars, policymakers, bankers, services providers from the global Islamic banking and finance industry who discussed various pressing topics in detail. Accordingly, the resolutions of the conference will be shared in due course.
The CBB Governor said he would also like AAOIFI’s Sharia Board to propose an implementation mechanism for its future standards after due consultation with the industry.
“At the same time, I would like to request Islamic financial institutions to take the consultation process seriously and to engage in a positive and proactive manner with the Sharia Board early on by participating in working groups and actively contributing to consultations when drafts of standards are issued.”—Zawya News