24 Questions
What is the main role of banks in developing economy financial systems?
To serve as the main source of finance for the majority of firms and the main depository for savings
What market failures do banks exist to solve?
Information asymmetry, economies of scale, and liquidity mismatches
Which regulatory body in Islamic finance and banking has the explicit mandate to formulate and conduct monetary policy, regulate and supervise financial institutions, and promote a sound and inclusive financial system?
Central Bank of Malaysia (BNM)
Which regulatory body in Islamic finance and banking was established in 1993 to promote and maintain fair, efficient, transparent securities and futures markets and facilitate the orderly development of a competitive capital market?
Securities Commission
Which international standard-setting body consisting of regulatory and supervisory agencies ensures the soundness and stability of the Islamic financial services industry?
Islamic Financial Services Board (IFSB)
Which Islamic international autonomous organization prepares accounting, auditing, governance, ethics, and Shariah standards for Islamic financial institutions (IFIs)?
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)
Which legal governance in Islamic finance outlines the expectations and guidance for IFIs in discharging their duties in Shariah-related matters?
Shariah Governance Framework
What is the highest Shariah authority in Islamic finance in Malaysia that advises BNM on Shariah matters?
National Shariah Advisory Council (NSAC)
Which Islamic finance and Shariah research institution was established in 2008 by BNM?
International Shariah Research Academic (ISRA)
Which regulatory body in Islamic finance and banking develops standardized Shariah-compliant financial documentation, product confirmations, and guidelines for the Islamic financial services industry, focusing on the Islamic Capital & Money Market segment?
International Islamic Financial Market (IIFM)
Which regulatory body in Islamic finance and banking may take appropriate intervention to avert risks from unregulated entities and has expanded resolution powers to facilitate the swift and orderly resolution of a financial crisis?
Central Bank of Malaysia (BNM)
Which Islamic finance and banking act provides the regulatory framework for Islamic financial institutions in Malaysia?
Islamic Finance Services Act 2013
What is the main role of banks in developing economy financial systems?
To serve as the main source of finance for firms
What are the market failures that banks exist to solve?
Information asymmetry, economies of scale, and liquidity mismatches
Which regulatory body in Islamic finance and banking serves as an international standard-setting body?
Islamic Financial Services Board (IFSB)
What is the explicit mandate of the Central Bank of Malaysia (BNM)?
To formulate and conduct monetary policy
What is the highest Shariah authority in Islamic finance in Malaysia?
National Shariah Advisory Council (NSAC)
What is the role of the Securities Commission in Islamic finance and banking?
To promote and maintain fair, efficient, transparent securities and futures markets
What is the role of AAOIFI in Islamic finance and banking?
To prepare accounting, auditing, governance, ethics, and Shariah standards
What is the role of IIFM in Islamic finance and banking?
To develop standardized Shariah-compliant financial documentation
What is the Shariah Governance Framework in Islamic finance and banking?
A guidance for IFIs in discharging their duties in Shariah-related matters
What is the role of ISRA in Islamic finance and banking?
To prepare accounting, auditing, governance, ethics, and Shariah standards
What is the Central Bank Act 2009 in Islamic finance and banking?
A legal governance that formulates and conducts monetary policy
What is the role of NSAC in Islamic finance and banking?
To advise BNM on Shariah matters
Study Notes
Overview of Banking Governance in Islamic Finance
- Banks play a crucial role in developing economy financial systems, serving as the main source of finance for the majority of firms and the main depository for savings.
- Banks exist to solve market failures due to information asymmetry, economies of scale, and liquidity mismatches.
- Regulatory bodies in Islamic finance and banking include the Central Bank of Malaysia (BNM), Securities Commission, Ministry of Finance, Islamic Financial Services Board (IFSB), International Islamic Financial Market (IIFM), and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
- BNM was established in 1959 and has the explicit mandate to formulate and conduct monetary policy, regulate and supervise financial institutions, and promote a sound and inclusive financial system.
- BNM has expanded resolution powers to facilitate the swift and orderly resolution of a financial crisis and may take appropriate intervention to avert risks from unregulated entities.
- The Securities Commission was established in 1993 to promote and maintain fair, efficient, transparent securities and futures markets and facilitate the orderly development of a competitive capital market.
- The IFSB serves as an international standard-setting body consisting of regulatory and supervisory agencies to ensure the soundness and stability of the Islamic financial services industry.
- AAOIFI is an Islamic international autonomous organization that prepares accounting, auditing, governance, ethics, and Shariah standards for Islamic financial institutions (IFIs).
- IIFM develops standardized Shariah-compliant financial documentation, product confirmations, and guidelines for the Islamic financial services industry, focusing on the Islamic Capital & Money Market segment.
- Legal governances in Islamic finance include the Central Bank Act 2009, Islamic Finance Services Act 2013, Government Funding Act 2005, Capital Market and Services Act 2007, and Banking and Financial Institutions Act 1989.
- Shariah governances in Islamic finance include the National Shariah Advisory Council (NSAC), Shariah Governance Framework, and International Shariah Research Academic (ISRA).
- NSAC is the highest Shariah authority in Islamic finance in Malaysia and advises BNM on Shariah matters, while the Shariah Governance Framework outlines the expectations and guidance for IFIs in discharging their duties in Shariah-related matters.
- ISRA is an Islamic finance and Shariah research institution established in 2008 by BNM.
Test your knowledge of banking governance in Islamic finance with this informative quiz. Explore the roles of regulatory bodies such as the Central Bank of Malaysia, Securities Commission, and Islamic Financial Services Board. Learn about legal and Shariah governances and their impact on the industry. Discover the important functions of organizations such as the Accounting and Auditing Organization for Islamic Financial Institutions and the International Islamic Financial Market. Take this quiz to gain a deeper understanding of the essential elements of banking governance in Islamic finance.
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