i-Ikhlas Bulletin 28022020 (2 files merged)

6TH EDITION VOL. 2

i-Ikhlas Bulletin

28th FEBRUARY 2020 / 4 REJAB 1441H

SHARIAH GOVERNANCE WHAT IS SGPD?
POLICY DOCUMENT
BNM had issued the Shariah
Since the introduction of the Shariah Governance Policy Document on
20 September 2019 and the
Governance Framework for Islamic requirements in this policy
document outline the Bank’s
Financial Institutions in 2011, the strengthened expectations for
effective Shariah governance
Islamic finance industry in Malaysia arrangements that are well
integrated with business and risk
has achieved significant milestones strategies of the Islamic financial
institutions.
towards institutionalising governance
Please clik "MORE INFO" for
structures, policies and processes to further information on the SGPD

promote end-to-end Shariah

compliance in Islamic finance

operations.

Efforts to further strengthen Shariah
governance standards remain a
priority to the Bank as good
governance models and practices
evolve in tandem with the growing
complexity of the Islamic financial
industry.

As such, the revised policy document KEY ORGANS UNDER
on Shariah Governance outlines a SHARIAH GOVERNANCE
more integrated Shariah governance CONTROL FUNCTIONS
policy and implementation that will MANAGEMENT
impact business model and strategy of
Islamic financial institutions as well BOARD
as drive innovation of value-adding SHARIAH COMMITTEE
Islamic financial products and services
through effective implementation of SECRETARIAT
the Shariah contract-based regulatory
framework.

SHARIAH & BUSINESS ADVISORY DEPARTMENT

Policy Document on Shariah Governance

Since the introduction of the Shariah Governance Framework for Islamic Financial Institutions in 2011,
the Islamic finance industry in Malaysia has achieved significant milestones towards institutionalising
governance structures, policies and processes to promote end-to-end Shariah compliance in Islamic
finance operations.

Efforts to further strengthen Shariah governance standards remain a priority to the Bank as good
governance models and practices evolve in tandem with the growing complexity of the Islamic financial
industry. As such, the revised policy document on Shariah Governance outlines a more integrated
Shariah governance policy and implementation that will impact business model and strategy of Islamic
financial institutions as well as drive innovation of value-adding Islamic financial products and services
through effective implementation of the Shariah contract-based regulatory framework.

Key organs under Shariah Governance

Control Management Board Shariah Secretariat
functions committee

Ensure effective Ensure compliance with Ensure institutionalisation of Provide objective and Provide operational support
management Shariah at all times a robust Shariah sound Shariah decision for effective functioning of
of Shariah
governance framework or advice the Shariah committee
non-compliance risk

Key responsibilites and requirements

Board Shariah committee

Ensure integration of Shariah governance Establish a robust methodology for
considerations within business and risk decision-making process
strategies of Islamic financial institutions Each member must exercise professional
Promote sound Shariah compliance objectivity and consistency in providing
culture views

Frequent quality engagement

Have “due regard” on Shariah committee Update board on any Shariah issues or
decision or advice matter that may affect safety and
Oversee effectiveness of Shariah soundness of Islamic financial institutions
committee in the aspects of appointment, Disclose any conflict of interest
reappointment and cessation processes,
professional objectivity, development of
skills and expertise, performance
assessment and remuneration, and
succession plan

Management Control functions

Establish management structure and Must be independent from business lines
reporting arrangement that provides clear Senior officers overseeing Islamic financial
scope of accountability between business institution’s risk management, compliance
lines and internal control functions and internal audit must be responsible for
Implement effective Shariah governance the following functions respectively
policies, procedures and practices

Shariah risk Shariah Shariah
management review audit

Proportionate arrangements for Islamic windows and foreign branches

“Board” refers to governing body or any committees locally (for foreign branches)
Shariah committee – minimum 3 members; at least 2 meetings a year
Disclosures on Shariah governance to be part of group/financial institution annual report
(for Islamic windows); submitted to the Bank (for foreign branches)

For more information on the policy document, log on to
www.bnm.gov.my

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