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A GLOBAL body for Islamic finance standards is drafting a new governance framework to regulate the growing trend of conventional banks converting into Sharia-compliant institutions.
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) said its Governance and Ethics Board met via video conference to hammer out details of an upcoming exposure draft.
The new standard arrives amid a wave of large-scale banking conversions across global markets, as conventional firms seek to tap into the rapidly expanding Islamic finance sector.
“This initiative is timely and significant, particularly at a time when a growing number of conventional financial institutions are considering or undergoing conversion into Islamic financial institutions,” said AAOIFI’s governance board chairman Farrukh Raza.
The proposed regulations will establish a structured blueprint for banks navigating the transition. It will enforce stricter oversight on conversion plans, pre-commencement vetting, ongoing monitoring, periodic financial reporting, and post-conversion compliance.
AAOIFI, based in Bahrain, expects the rules to bolster investor confidence and safeguard stakeholder interests by ensuring transitions strictly uphold Sharia principles.
Following detailed deliberations, the board directed its secretariat to revise the draft text. Specific sections will be sent back to a dedicated working group before being presented at an upcoming board meeting for final review.
AAOIFI secretary general Omar Ansari said the standard responds directly to a pressing market need.
“The continued deliberative process will further enhance the quality and practical relevance of the proposed standard,” he added.
avinash@gdnmedia.bh
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