Malaysian government took a further step in enhancing the framework of Shari’ah governance by passing the Central Bank of Malaysia Act 2009 (CBA). This new legislation was passed by the Parliament in July 2009 which received royal assent on 19 August and gazetted on 3rd September 2009. The CBA consists of 100 sections divided into 15 parts. Unlike the Central Bank of Malaysia Act 1958, the CBA inserts new provision in Part VII which covers provision pertaining to Islamic financial business. I take this opportunity to elaborate the effect of section 51-58 of the CBA that enhances the framework of Shari’ah governance in Malaysia.
Section 51-58 of the CBA clarifies and enhances Shari’ah governance framework in Malaysia in the following aspects: –
(i) It grants authority to the Central Bank of Malaysia (BNM) to establish the National Shari’ah Advisory Council (SAC) and to specify its distinctive functions as well as secretariat to assist the SAC in carrying out its definitive roles. This vividly clarifies the roles and responsibilities of the SAC as the highest and sole authority in Islamic financial matters.
(ii) In parallel with the status of the SAC as the highest authority in matters pertaining to Islamic banking, finance and takaful, the appointment of the SAC members shall be made by the Yang di-Pertuan Agong. The SAC’s remuneration and the terms of reference then shall be determined by the BNM.
(iii) It sets the minimum fit and proper criteria of the SAC members. The candidate must at least knowledgeable and qualified in Shari’ah or has appropriate knowledge and experience in banking, finance and law. Section 53 of the CBA also allows expert in other related disciplines as well as judges of the civil court and shari’ah court to be the SAC members. This provision is unique as combination of mixed expertise amongst the SAC members would potentially contribute towards more solid and sound Shari’ah rulings.
(iv) The defunct of section 16B of the Central Bank of Malaysia (Amendment) Act 2003 merely provides that the Shari’ah rulings issued by the SAC are binding upon the arbitrator. Section 57 of the CBA then affirms the legal status of Shari’ah pronouncement issued by the SAC to be binding upon both the court as well as arbitration.
(v) The court or arbitrator is not obligated to refer the SAC to resolve any Shari’ah issue in the previous regulation. Section 58 of the CBA on the other hand makes it mandatory for the court or arbitrator to refer the SAC for deliberation on any Shari’ah issue as well must take into account its existing Shari’ah rulings.
(vi) It clarifies the status of Shari’ah ruling issued by the SAC in the event it contradicts with Shari’ah pronouncement of Shari’ah committee at individual Islamic financial institution (IFI). The Shari’ah rulings of the SAC shall prevail and have binding force over the Shari’ah resolutions of Shari’ah committee of IFI.
For full version of the CBA, click here:- The Central Bank of Malaysia Act 2009
Law is order, and good law is good order. [Aristotle]
Sultan Qaboos Grand Mosque, Muscat, Oman