IFSB consults on guiding principles for corporate governance

The Islamic Financial Services Board (IFSB) is seeking comments, until May 20, 2023, on an exposure draft of the revised guiding principles on corporate governance for institutions offering Islamic financial services under the banking segment. The revised guiding principles are relevant for central banks, regulatory and supervisory authorities, international organizations, institutions offering Islamic financial services, academics, and other interested parties.

The Revised Guiding Principles on Corporate Governance are designed to strengthen integrity and resilience of institutions offering Islamic financial services by enhancing the effectiveness of their corporate governance frameworks, reinforce international best-practices and positively contribute to financial stability and sustainable economic growth. The Revised Guiding Principles build on the Guiding Principles on Corporate Governance (IFSB-3), which were published in 2006, by incorporating additional areas of governance to provide a complete set of guidance that is aligned with the BCBS Corporate Governance Principles for banks. The key objectives of the Guiding Principles are to:

• Provide guidance on areas where minimum governance structures and processes are required for a sound corporate governance framework, including effective Sharī`ah governance mechanisms.
• Protect the interests of stakeholders in conformity with public interest—among stakeholders, primary concern should be given to depositors, unrestricted investment account holders (IAH), restricted IAH and shareholders, respectively.
• Strengthen transparency of institutions offering Islamic financial services and accountability to enhance stakeholders’ trust and confidence.
• Promote financial sustainability by implementing a holistic approach to include financial and non-financial criteria.