Islamic banks must demonstrate superior ethical conduct in everyday affairs as the trust of the general public can be shattered if unethical business practices are seen, top industry watchers have warned.
Experts who participated in the Waqf Fund’s sixth roundtable discussion on “Ethical checks and balances in an Islamic bank” at the Ritz-Carlton Bahrain, Hotel and Spa included board members, executives from member institutions, Sharia scholars, representatives from professional firms and officials from the Central Bank of Bahrain (CBB).
The roundtable discussed the ethical issues facing Islamic banks and measures needed to ensure conformity with high ethical standards.
According to Khaleeji Commercial Bank chairman Dr Fuad Al Omar, ethics and ethical conduct have a special place in Islam.
The Islamic banking industry globally needs to improve in this area.
Not only that, ethical institutions typically attract better and more committed workforce, have better brand recognition with customers and suppliers and as a result enhance shareholder value in the long term.
Integrity, honesty and transparency are the most important components of ethics in Islamic banking.
Apart from that, he stressed Islam also emphasises self-regulation, self-evaluation and continuous monitoring and review of one’s own acts.
The CBB said some of the key recommendations that emerged from the discussion include, the structuring of holistic financial incentives for bank management in a way that they do not create ethical issue such as accrual system for out of the ordinary and large bonuses or claw-back provisions would reduce the temptation to show short-term performance at the cost of long-term value enhancement.