Shariah Boards and the Corporate Governance of Islamic Banks in the United Kingdom

Abstract

In the last decade Islamic banks (or banks with Islamic windows) that can compete with conventional (i.e. non-Islamic banks) have begun to emerge in Britain. A governmental policy of neither prejudice nor favour, coupled with legislative reforms evince the UK government’s increasing interest in encouraging and even actively promoting Islamic banking and finance, and London as its European capital. At the same time, codes and guidance concerning corporate governance have gained stringency in the UK, following on the financial crisis that began in 2007. Structurally similar to conventional banks in most legal respects, the Shariah Board of Islamic banks and financial institutions poses a variety of unique challenges to UK corporate governance. This article explores those challenges and outlines how they might begin to be met; it does so with reference to corporate governance measures implemented in Malaysia and by its central bank, the Bank Negara Malaysia.