Sharia-related issues, including compliance of banking operations with Islamic tenets, are another significant challenge addressed in the bill. Through Sharia, Seyed Abbas Mousavian, a senior member of the CBI’s Fiqh Council, told the Financial Tribune Aug. 7, “Misunderstandings about the performance of the banking system will be removed.” He added, “With this trend, people’s trust and confidence in the banking system will increase.”
Though it was established almost a decade ago, the Fiqh Council, which examines issues in terms of their adherence to Islamic jurisprudence, has not been recognized as an entity within the CBI whose directives enjoy legal or official status. This has to do in part with the absence of necessary reforms for the bank. The Banking Reform Bill seeks to address this shortcoming by acknowledging the importance of an effectively functioning Fiqh Council within the CBI.
The Fiqh Council of the Securities and Exchange Organization — tasked with ensuring that capital market financial instruments comport with Sharia — has boosted the introduction of new investment vehicles to the securities market. In a similar vein, the strengthening of the CBI’s Fiqh Council under the reform bill is intended to boost the likelihood of new monetary instruments being added to the CBI’s toolbox alongside enhanced Sharia supervision of UFIs.
Nonetheless, for the administration of President Hassan Rouhani to achieve the results envisioned by the proposed law, certain preconditions must be met. For instance, the Banking Reform Bill aptly defines price stability and inflation control as the core objectives of monetary policy, but this runs up against a shortcoming with respect to the governance structure of the CBI concerning the limited powers of the central bank governor under current law.