The Islamic finance standard-setting body AAOIFI said it would overhaul rules governing Islamic finance scholars whose role and potential conflicts of interest have come under increased scrutiny.
The emerging Islamic finance industry is governed by national regulators and Islamic scholars interpreting Islamic law, or sharia. Interpretations can vary and critics of the industry say there is little transparency in scholars' rulings.
The Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions ( AAOIFI) said it would work out new ways to regulate scholars' shareholdings and their conduct on banks' sharia boards.
"The new governance standard will address concerns including on the number of sharia supervisory boards that a sharia scholar can effectively serve," it said in a statement sent to Reuters on Monday.
Most Islamic banks are vying to attract the same small number of influential scholars to their boards, and some of the top scholars sit on more than 50 boards, raising the question of conflicts of interest.
AAOIFI said the new standard would regulate shareholdings of sharia scholars in financial institutions and advisory services provided by companies owned by scholars.
The body whose standards are mandatory in at least seven countries, including Bahrain and the United Arab Emirates, also said it has approved two new accounting standards on financial reporting and investments in sukuk, or Islamic bonds.
| Reuters |
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