The Central Bank of Bahrain has issued fresh and comprehensive regulations for Islamic banks in the country. The regulations, issued after extensive consultation with the industry and the Centralized Shari’ah Supervisory Board (CSSB), are expected to result in a paradigm shift in improving the Shari’ah compliance and governance standards among Islamic banks and shall set proper benchmarks for global Shari’ah governance practices. The new regulations will be applicable from 30 June 2018 on all Islamic retail and wholesale banks in Bahrain. For the first time, an Independent External Shari’ah Compliance Audit (IESCA) has been made mandatory. The first IESCA report is to be issued in 2020 based on the transactions, structures and activities of 2019. It marks a significant new step in independent confirmation of whether Shari’ah governance is embedded in the day to day functioning of an Islamic bank. According to Khalid Hamad, ED of Banking Supervision at the central bank, the new Shari’ah Governance module sets higher standards of transparency, governance and competence for Islamic banks in Bahrain and it clarifies the roles and responsibilities of the management and the board of directors towards Shari’ah compliance.
