LEGAL ASPECTS OF CORPORATE AND SHARIAH GOVERNANCE OF ISLAMIC FINANCIAL INSTITUTIONS IN MALAYSIA
Keywords:
Islamic Banking and Finance, Corporate Governance, Shariah Governance, Legal, RegulatoryAbstract
The concept of corporate governance, which is based on the principles of accountability, transparency, and fairness, is an essential element in the context of Islamic banking and finance. Compared to its conventional counterpart, Islamic financial institutions are subject to the same guidelines and standards on corporate governance practices in addition to the Shariah governance guidelines issued by the regulators. At the international level, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) have issued various standards and guidelines from time to time to complement the corporate governance standards issued by other authorities such as Organisation for Economic Co-operation and Development (OECD) and Basel Committee for Banking Supervision (BCBS). The concept of corporate and Shariah governance have been incorporated into the legal and regulatory framework in Malaysia and it is being updated from time to time. However, issue arises as to whether or not the existing legal framework is adequate in governing the Islamic financial institutions. Thus, the objective of this study is to discuss the legal aspects of corporate and Shariah governance framework of Islamic financial institutions in Malaysia. This legal study applies qualitative research methodology that emphasises on library-based research. References are made to relevant legislations, standards and guidelines to provide insight on the legal aspects of corporate and Shariah governance principles in the Islamic financial institutions in Malaysia. Finding of the study shows that Malaysia has a comprehensive legal and regulatory framework regulating coprorate and Shariah governance in Islamic financial instutions that indicates Malaysia's commitment towards promoting good corporate and Shariah governance practices in the Islamic banking and finance industry.
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Central Bank of Malaysia Act 2009
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