Skip to main content
Entire section Custom print Text Only Rich Text Print

Article (5) Governance Requirements

N 4743/2020 Effective from 26/10/2020
  1. 5.1 The Institution housing an Islamic Window must comply with Islamic Shari’ah in all of its goals, activities, operations and code of conduct in all matters related to Islamic window at all times.
     
  2. 5.2 Branches of foreign licensed financial institutions housing an Islamic Window must adhere to this standard or establish equivalent arrangements to ensure regulatory comparability and consistency. The equivalent arrangement, if applicable, should include the matters related to general assembly, the Board and its Committees without contradicting the prevailing laws in the UAE. The equivalent arrangements shall be submitted to the Central Bank for approval.
     
  3. 5.3 Each Institution with an Islamic Window is required to comply with the Shari’ah Governance Standard for Islamic Financial Institutions and other Regulations and Standards issued by the Central Bank, including but not limited to:
     
  4. a. The organizational structure of the Islamic window should ensure that the Shari’ah control divisions or sections are independent and are not subject to any influence that may affect their independence;

  5. b. Alignment of the divisions or sections stated in the clause (a) with the three lines of defense approach as set out in the Central Bank’s Corporate Governance Standard and Shari’ah Governance Standard for Islamic financial institutions.

  6. 5.4 The Board is in ultimate control of the Institution housing an Islamic Window and accordingly responsible for the Islamic Window’s compliance with Islamic Shari’ah and the requirements set in this Standard.

  7. 5.5 Senior Management of the Institution with an Islamic Window is responsible and accountable to the Board for the sound and prudent day-to-day management of the Institution including executing and managing the Shari’ah compliant activities and businesses. All the Shari’ah compliant activities and business of the Institution must be offered through the Islamic window.

  8. 5.6 The Institution housing an Islamic Window should appoint a Head of Islamic Window who must be dedicated to the operations of the Islamic Window and must not perform any tasks that are not within the scope of the Islamic Window.

  9. 5.7 The appointment of the Head of Islamic Window must be approved by the Central Bank. The Central Bank must be informed regarding the organizational structure of the Islamic Window at least 20 working days before the same is implemented.

  10. 5.8 The Head of Islamic Window should report directly to the Executive Management Committee of the Institution or the CEO. The Head of Islamic Window is responsible and accountable to the Executive Management Committee of the Institution or the CEO for the operations of Shari’ah compliant activities and businesses. The Head of the Islamic Window is responsible to coordinate with the relevant departments concerning activities and businesses that comply with Islamic Shari’ah and shall be regarded part of the business line.

  11. 5.9 The Head of Islamic Window should:
    1. have a bachelor degree or masters in banking and finance or other relevant fields,
    2. demonstrate adequate knowledge, and experience (not less than 10 years) in Islamic banking and finance that will allow him/her to lead Shari’ah compliant business, and
    3. have held relevant senior positions in the banking sector or other relevant sectors.

  12. 9.5 The Institution housing an Islamic Window must adopt an approach with regard to conducting the Shari’ah compliant businesses and activities within the institution. Such approach should take into consideration staffing and physical premises in accordance with the size and the complexity of the Shari’ah compliant business and activities. The approach may take one of the following forms:
    1. -Stand-alone separate branches and offices to service the Islamic Banking clientele as well as designated staff;
    2. -Embedding of designated and/or dedicated Islamic Window personnel within the existing branch network and premises.
    3. -Any other form subject to the Central Bank approval.

    Such approach must be approved by the ISSC and the approach submitted to the Central Bank for review and approval every 5 years unless the HSA or the Central Bank requires a shorter period.

  13. 5.10 The Institution Housing an Islamic Window may leverage on its existing infrastructure to source Shari’ah compliant activities, including the offering of Shari’ah compliant products and services through the existing business lines. The institution housing an Islamic Window must develop an approach to internal services (between different departments) with respect to Islamic Window in order to ensure the compliance with Islamic Shari’ah at all times.
  14.  
  15. 5.11 The approach to internal services must include the following:
  16.  
  17. a. A minimum of one designated function to manage Shari’ah compliant Asset and Liability Management (ALM), Treasury and Investment operations.
  18.  
  19. b. A dedicated sales function with appropriate Shari’ah qualification to market and sell Shari’ah compliant products and services, and employees at this function are not allowed to market or sell conventional products. Other sales personnel may sell Shari’ah compliant financial products and services to customers provided that they have been given adequate and appropriate training and they are supported by the dedicated Islamic Window sales function.
  20.  
  21. c. Development and delivery of a comprehensive and specific training plan to cover all staff engaged in Shari’ah compliant operations, including staff assuming positions in the front line, middle and back offices and control functions, to ensure adequate management of the Shari’ah compliant products and services within the institution. The training program should take into account:
    1. specifics of the functions (roles) performed by the staff, and equip the staff with information and skills, depending on the nature of work of each employee, to ascertain compliance with Islamic Shari’ah, and
    2. the general banking and business risks associated and encountered with that function as well as any Shari’ah non-compliance risks.
       
  22. d. The approach towards internal services should be approved by the ISSC and submitted to the Central Bank for review and approval. Any material changes thereafter must be submitted to the Central Bank for approval.