Weak corporate governance leads to the collapse of financial institutions, as proven by the 2008 financial crisis, when regulators started to highlight the importance of governance, disclosure, and transparency, warned Deputy Minister of Finance and Economy (Fiscal) and Chairman of Brunei Darussalam Central Bank (BDCB) Dato Seri Paduka Awang Haji Ahmaddin bin Haji Abdul Rahman in a pre-recorded keynote address at the opening of Syariah Advisory Conference 2022 (SAC 2022) at the Musyawarah Hall of the International Convention Centre, in Berakas yesterday.
The conference was themed ‘Syariah Governance Framework: Quality Versus Compliance’.
Corporate governance refers to the rules, practices, and processes by which an organisation is directed and controlled, the deputy minister explained, thus “strong and transparent corporate governance leads companies to make ethical decisions which benefit their stakeholders, while weak and obscure corporate governance would lead an organisation to fall apart, often resulting in bankruptcy”.
Similarly, in Islamic finance, “the implementation of Syariah governance emphasises morals and ethics by promoting amanah (trust) and adil (fairness), and encourage accountability and transparency which align with the core value of faith towards Allah the Almighty”.
He noted that more than 50 per cent of the market share in Brunei Darussalam is made up of Islamic financial assets, with the Islamic financial ecosystem in the Sultanate comprising Islamic banks; Takaful operators; Islamic finance companies; Islamic investment dealers including Islamic window; sukuk and other ancillary services.
As such, in 2018, BDCB issued a notice and guidelines which required all the Islamic financial institutions in the Sultanate to establish their own Syariah governance frameworks and improving the regulatory framework to make the country an international hub for Islamic finance.
The Islamic financial institutions “can apply and embrace the spirit of the framework where the board of directors, Syariah advisory body, and the management ensure their businesses are Syariah-compliant”.
He added that other initiatives taken by the institutions include “increasing human resource capacity in Syariah review, Syariah risk management, and internal Syariah audit through onboarding expertise and knowledge sharing”.
He believes the framework will “safeguard the interests and rights of all stakeholders, generating satisfaction and ensuring public and investors’ confidence in the Islamic financial system”.
Nonetheless, the deputy minister said the Islamic Finance Development Indicator (IFDI) Report 2020 found Brunei Darussalam to have a strong regulatory landscape.