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Article (4) Definitions

C 33/2015 STA Effective from 3/1/2022
  1. a. Affiliate: An entity owned by another entity by more than 25% and less than 50% of its capital.
  2. b. Board: Islamic Bank’s board of directors.
  3. c. Compliance with Islamic Shari’ah refers to compliance with Islamic Shari’ah in accordance with:
    1. a. resolutions, fatwas, regulations, and standards issued by the Higher Shari’ah Authority (“HSA”)in relation to licensed activities and businesses of Islamic Bank (“HSA’s Resolutions”), and
    2. b. resolutions and fatwas issued by Internal Shari’ah Supervision Committee (“ISSC”) of respective Islamic Bank, in relation to licensed activities and businesses of such institution (“the Committee’s Resolutions”), provided they do not contradict HSA’s Resolutions.
  4. d. Central Bank: Central Bank of the UAE
  5. e. Confidential Information: information that is publicly unavailable and where its disclosure is not permitted as per Article 120 of Decretal Federal Law No. (14) of 2018.
  6. f. Fatwas: juristic opinions on any matter pertaining to Shari’ah issues in Islamic finance, issued by HSA or ISSC.
  7. g. Group: A group of entities which includes an entity (the ‘first entity’) and:
    1. a. any Controlling Shareholder of the first entity;
    2. b. any Subsidiary of the first entity or of any Controlling Shareholder of the first entity; and
    3. c. any Affiliate, joint venture, sister company and other member of the Group.
  8. h. High Quality Liquid Assets or HQLA: Assets unencumbered by liens and other restrictions on transfer which can be converted into cash easily and immediately, with little or no loss of value, including under the stress scenario.
  9. i. Higher Shari’ah Authority or HSA: is the Central Bank’s Higher Shari’ah Authority for Islamic banking and financial activities.
  10. j. Independence: Ensuring that the ISSC is not subject to any form of undue influence when issuing resolutions and fatwas in accordance with the Shari’ah parameters, and ensuring that the Internal Shari’ah Control Division or Section and Shari’ah Audit Division or Section are also not subject to any form of undue influence. This should be carried out to strengthen the confidence of both shareholders and stakeholders in the Islamic Bank compliance with Islamic Shari’ah.
  11. k. Internal Shari’ah Audit: regular process to inspect and assess Islamic Banks’ compliance with Islamic Shari’ah and the level of adequacy and effectiveness of Islamic Banks’ Shari’ah governance systems.
  12. l. Internal Shari’ah Control Division Section: a technical division (or section) in the Islamic Bank with a mandate to support the ISSC in its mandate.
  13. m. Internal Shari’ah Supervisory Committee or ISSC: a body appointed by the Islamic Bank, comprised of scholars specialized in Islamic financial transactions, which independently supervises transactions, activities, and products of the Islamic Bank and ensures they are compliant with Islamic Shari’ah in all its relevant objectives, activities, operations, and code of conduct.
  14. n. Liquidity Risk Tolerance: the level of liquidity risk that the bank is willing to assume, it should be appropriate for the business strategy of the bank and its role in the financial system and should reflect the bank’s financial condition and funding capacity.
  15. o. Restricted Investment Account: The account holders authorize Islamic Banks to invest their funds based on Mudarabah or agency contracts (Wakala) with certain restrictions as to where, how and for what purpose these funds are to be invested.
  16. p. Unrestricted Investment Account: The account holders authorize Islamic Banks to invest their funds based on Mudarabah or agency contracts (Wakala) without imposing any restrictions. The Islamic bank can commingle these funds with their own funds and invest them in a pooled portfolio.
  17. q. Islamic Window: refers to the licensed activities that are carried on in accordance with the Islamic Shari’ah that are carried on by financial institutions for their account or for the account of or in partnership with third parties which comply with the regulatory requirements stated in this Standard and other regulations issued by the Central Bank.
  18. r. Senior Management: The executive management of the Islamic Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the financial institution, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions. The term Senior Management includes the head of Islamic Bank.
  19. s. Shari’ah Non-Compliance Risk: probability of financial loss or reputational risk that an Islamic Bank might incur or suffer for not complying with Islamic Shari’ah.
  20. t. Shari’ah Supervision: monitoring of Islamic Bank’s compliance with Islamic Shari’ah in all its objectives, activities, operations, and code of conduct.
  21. u. Subsidiary: An entity, owned by another entity by more than 50% of its capital, or under full control of that entity regarding the appointment of its board of directors.