A number of the UAE's Islamic bank shave opposed some of the new rules proposed by the country's Central Bank earlier this year.
The banks claim the new impositions violate Shari'ah and include the imposition of overdrafts, punitive interest on debtdefault, increasing loan exposure, and check deduction on personal accounts.
The Islamic banks also appointed a new mouthpiece to act as the independent negotiator for the Shari'ah boards of the Islamic banks, the Higher Coordination Committee for Islamic Banks. The new body submitted its own counter proposals to the Central Bank, requesting common standards across the board for all Shari'ah compliant business.
The HCCIB circulated a draft contract that would cover deposit accounts, servicing and funding and said that once this was approved by the Central Bank, the new contract would be binding for all Islamic banks in the UAE.
The new body is similar to the national Shari'ah co-ordination committees already functioning in Bahrain, Egypt, Sudan,Pakistan, and Malaysia. However, the HCCIB was originally opposed by the Islamic banks out of the fear that it would replace the role of the Shari'ah committees operating in the individual banks.
Mohamed Roushdy, chief information officer for the Financial Services Authority, told The Islamic Globe: "Many people who gave their opinions were from Shari'ah departments in banks who thought they would lose their jobs and power if there was a Shari'ah board at the Central Bank."
He continued: "But this should not be the case, because a Shari'ah board at the Central Bank will work on setting standards and approving new products at a higher level without going for details which need lengthy discussions and can differ from one bank to the other."
Roushdy claimed that a centralized Shari'ah committee would enhance the industry by promoting the concept of standardization and streamlining, and would speed up the new product approval process, as it would set a common Shari'ah infrastructure that all UAE banks could use as a template upon which to construct their products. He also said that at a recent conference in Muscat here commended the UAE's neighbor, Oman also take a centralized approach to Shari'ah compliance.
© The Islamic Globe 2011
