The new legal framework for Islamic banking and takaful, that will come into force this year, will pave the way for the development of an end-to-end Sharia-compliant regulatory framework for the conduct of Islamic financial operations according to Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz.
The new framework would provide clarity on the fundamental requirements of Syariah that must be adhered to for the contractual arrangements between the financial institution and the customer to remain enforceable.
The framework also outlines the operational requirements for the effective application of Syariah principles in the conduct of Islamic financial institutions.
“This aims to strengthen the risk management practices beyond the traditional credit, market and liquidity risks to also include inventory risk, ownership risk and Syariah compliance risk,” Zeti said at the opening of the Brunei Darussalam Islamic Investment Summit 2013.
She said the legislation also provided for the resolution of Islamic financial institutions to be in line with distinctive elements of the relevant Islamic contracts, thus improving the legal and procedural aspects for the orderly resolution of Islamic financial institutions.
On the Islamic finance development, Zeti said the new wave of internationalisation for Islamic finance required increased collaboration across jurisdictions.