Post by Karim Ginena on Dec 5, 2013 11:48:10 GMT 4
Sharī'ah Risk and Corporate Governance of Islamic Banks
Hamad Bin Khalifa University
Corporate Governance, 14(1), Forthcoming.
Abstract: A global theory of corporate governance should not merely transplant rules without recognizing the local industry and context. For Islamic banks, corporate governance includes compliance with religious values (i.e. sharī'ah) in all activities. Possible consequences of sharī'ah non-compliance include higher costs, financial losses, liquidity problems, bank runs, bank failure, industry smearing, and financial instability. To aptly meet their obligation, directors and senior management must have a clear understanding of sharī'ah risk, and how it can hinder bank objectives. By amalgamating dispersed insights, introducing new ones, and interlinking the two, this conceptual research defines sharī‘ah risk, identifies credit, legal, compliance, market, and reputational risk that it may evoke, and categorizes its causes and events. It also devises a tool for measuring this risk, suggests ways for directors and senior management to fulfill their fiduciary duty, and proposes regulatory measures.