Chapter Three: Responsibilities of the Board and the Executive Management
Article 5: Responsibilities of the Board of Directors
1. The board is primarily responsible for the overall Shariah governance framework of the bank and the compliance of its Islamic banking activities with the Shariah principles and rules. The board is also responsible for approving the bank’s Shariah governance framework, performing continuous oversight over the effective functioning of the framework, and ensuring that the framework is commensurate with the size, complexity, and nature of the bank’s business.
2. The board shall approve all Shariah policies of the bank and supervising the effective implementation of these policies.
3. The board shall provide the necessary mechanisms and methodology for risk management to protect the interests of investment account holders through Profit-lost sharing accounts.
4. The board shall supervise the bank’s compliance and implementation of the Shariah decisions issued by the committee.
5. The board shall ensure that an effective communication policy among the key functions of the bank is in place to facilitate and allow the escalation of important matters related to compliance of Islamic banking activities with the Shariah principles and rules.
6. The board shall remunerate the Shariah committee members appropriately based on the recommendation of the nomination and remuneration committee of the board. Such remuneration shall be commensurate with the duties and responsibilities of these members and consistent with SAMA’s relevant instructions.
7. A formal procedure shall be adopted, as proposed by the nomination and remuneration committee, to assess the performance of the Shariah committee members based on competence, knowledge, contribution and effectiveness.
8. The resume of all the Shariah committee members shall be disclosed so that shareholders and investors can judge the competence and ability of these members to carry out their duties effectively.
9. The mechanism used to supervise the integrity and performance of the committee members shall be disclosed. Moreover, it must be taken into account not to nominate any member who has previously been convicted by a court judgment or of a crime impinging on honor or integrity.
Article 6: Responsibilities of the Executive Management
1. The management shall identify and refer any Shariah issues to the Shariah committee for decisions and provide the committee with the required information and disclosures in a timely manner.
2. The management shall monitor and implement the Shariah decisions issued by the committee.
3. The management shall provide continuous education and training programs to key internal stakeholders, including the board, the Shariah committee, and the employees related to Shariah and finance matters. This is to ensure that all departments/units associated with the Shariah governance framework of the bank are sufficiently exposed to current developments in Shariah related matters.
4. The management shall develop and adopt a holistic culture of Shariah compliance within the bank to comply with the Shariah principles and rules in its overall Islamic banking activities. In addition, all relevant employees are expected to be familiar with the Shariah-compliant products offered by the bank as well as similarities and differences between Shariah-compliant banking products and services and others that are conventional.
5. The management must ensure that Shariah policies and procedures are accessible to employees involved in the implementation of the Shariah governance framework.
6. The management shall ensure that all Islamic banking operations are carried out according to the bank’s Shariah policies and procedures and shall constantly review and update the policies and procedures to reflect market practices and developments.
7. If the management becomes aware that certain financial or Islamic banking transactions appear to involve operations that are not Shariah-compliant, the management shall:
a) Immediately inform the board and the committee.
b) Immediately stop providing any banking services or products in that business line related to the Shariah non-compliant operation.
Within (30) business days of becoming aware of such non-compliance, submit a plan to rectify the state of non-compliance with the Shariah principles and rules, to be approved by the board and endorsed by the committee.