Compliance with Shariah requirements is a prerequisite in ensuring the legitimacy and integrity of Islamic financial products and services. It is therefore essential for an Islamic financial institution (IFI) to establish sound operational framework and infrastructure to ensure that its conduct of Islamic financial transactions is consistent with Shariah.
The Shariah contract-based regulatory policy is intended to promote consistency of Shariah contract application in Islamic financial products and services. Consistency in the application of wa`d is important as it is used across Islamic financial products and services in combination with other Shariah contracts to mainly secure future trade transactions or as a risk mitigation arrangement. This policy is envisaged to strengthen legal certainty and Shariah compliance practices by IFIs.
This policy document aims to –
(a) provide reference on Shariah rulings applicable to wad;
(b) set out key operational requirements for the implementation of wad; and
(c) promote end-to-end compliance with Shariah requirements, which further promote sound banking and takaful practices and safeguard consumer interests.
This policy document sets out the following:
(a) salient features and essential conditions of wad in Part B;
(b) regulatory and supervisory expectations for the operational requirements on governance and oversight, structuring, risk management, business and market conduct as well as financial disclosure in Part C; and
(c) requirement for IFIs to submit gap analysis and implementation plan on wad in Part D.
This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking
