| April 7
April 7 Pakistan's central bank has published
detailed rules on sharia governance, giving scholars greater
independence from their banks' managements, as regulators revamp
Islamic finance in the world's second most populous Muslim
Pakistan was one of the first countries to introduce Islamic
banking at a national level in the 1970s, but the industry has
developed slowly partly because of consumer scepticism over its
authenticity, an issue which regulators now seem keen to tackle.
The central bank is rolling out a five-year plan to promote
Islamic finance through proposed legislative changes, product
incentives and instructions to market participants.
The new governance rules describe the roles and
responsibilities of Islamic banks' managements and their sharia
scholars, who rule on whether activities and products at the
banks follow religious principles.
To serve on a bank's sharia board, scholars must meet
elegibility criteria set by the central bank and serve
three-year terms which are renewable. They can work at a maximum
of three Islamic banks in Pakistan at any one time.
Sharia board decisions are binding on the managements of
Islamic banks, while any disputes are to be referred to the
central bank's own sharia board for resolution.
Each Islamic bank must have a resident sharia board member
to provide day-to-day advice, and this board member can only
work with a single Islamic bank in Pakistan.
An external sharia audit of bank activities is required
annually, together with a report which must follow a format
defined in consultation with the Institute of Chartered
Accountants of Pakistan.
Last week, the central bank issued rules relating to Islamic
banking windows, sharia-compliant foreign bill discounting and
priority banking services at Islamic banks. It is also drafting
guidelines for warehouse receipt financing, which Islamic banks
could use to conduct sharia-compliant lending.
(Editing by Andrew Torchia)