Inconsistency in compliance with Sharia standards poses an existential threat to Islamic finance, Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj has said.

According to Al Maraj, it was to prevent such an occurrence that the CBB was drafting legal documentation to set up a Sharia board of scholars that would oversee the kingdom's Islamic finance sector, said a report in the Gulf Daily News (GDN), our sister publication.

All Islamic banks already have a Sharia board but their scope is limited to vetting their own products.

A country-level approach, he said would help to limit differences between products, speed the creation and rollout of new products and boost investor confidence, enabling Bahrain to better compete with regional rivals.

A "legal instrument" is now being prepared that would set out details of the Sharia board.

"The CBB also wants to see Bahrain's Islamic finance industry lead in adoption of best practices, which will have a positive impact on their conduct and performance."

The regulator continues to incorporate latest standards by Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) into the regulatory structure of the kingdom, he said.

The governor said this yesterday during the opening session of AAOIFI's 14th Annual Sharia Conference at the Diplomat Radisson Blu Hotel, Residence and Spa.

The two-day conference is being held under the auspices of the CBB.

Discussions at the conference will include topics related to application of Sharia to international Islamic finance products, services and practices as well as continuing innovation of Islamic finance to support further growth and expansion of the industry across the world.

Guiding the discussions are eminent Sharia scholars as well as leading Islamic finance practitioners and academicians.

Participants include senior representatives from central banks, regulatory authorities, financial institutions, accounting and auditing firms, legal firms, universities and higher learning institutions, and other Islamic finance industry stakeholders from the Middle East, Africa, Asia, Europe and North America.

AAOIFI secretary-general Dr Hamed Hassan Merah said the conference is a major part of AAOIFI's consultation with the international Islamic finance industry especially on AAOIFI's efforts to develop new standards and review existing ones.

Following the conference, AAOIFI will hold training sessions for its Certified Sharia Adviser and Auditor and Certified Islamic Professional Accountant qualification programmes from tomorrow to Friday.

Established in 1991, AAOIFI is a leading international not-for-profit organisation primarily responsible for development and issuance of standards for the global Islamic finance industry.

It has issued a total of 94 standards in the areas of Sharia, accounting, auditing, ethics and governance for international Islamic finance.

It is supported by more than 200 institutional members, including central banks and regulatory authorities, financial institutions, accounting and auditing firms, and legal firms, from more than 45 countries.

AAOIFI standards are currently followed by all leading Islamic financial institutions across the world and have introduced a progressive degree of harmonisation of international Islamic finance practices, Dr Merah said. - TradeArabia News Service