Islamic banking , finance and corporate governance in the gulf cooperation council countries

Author:Saad Badah
Position:Doctoral candidate, Brunel University Faculty of Law
Pages:32-40
 
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ISLAMIC BANKING, FINANCE AND CORPORATE GOVERNANCE IN
THE GULF COOPERATION COUNCIL COUNTRIES
SAAD BADAH
I. Introduction .............................................................................................................................. 32
II. Islamic Banks in GCC Countries .......................................................................................... 33
III. Corporate Governance and Shariah Governance ............................................................... 35
IV. Islamic Banking and Corporate Governance in British Courts ..................................... 37
V. Challenges of Islamic Banking ............................................................................................... 38
VI. Conclusion .................................................................................................................................40
I. INTRODUCTION
Recent experiences in the financial industry indicate that poor
governance in banking and financial institutions pose enormous risks, if not
consequences, to these sectors and to the economy as a whole. One of these
experiences is the 2007-2009 global financial crisis.
1
Banking crises have in many
occasions crippled institutions, disrupted economies, intensified poverty, and
destabilized governments.
2
Because of the vital importance of banks to overall
economic stability, good corporate governance remains critical to the well-being
and survival of these sectors.
3
In contrast to the poor corporate governance epidemic that brought about
the financial crisis, Islamic banks have shown to be resilient.
4
Curiously, most
Islamic banks and financial institutions (hereinafter, IBFIs) are located within
the Gulf Cooperation Council (“GCC”) countries.
5
It is thus interesting to
inquire on whether or not the corporate governance of IBFIs differs from its
conventional counterparts and whether these differences impact the performance
Saad Abdullah Aljadean, doctoral candidate, Brunel University Fac ulty of Law; Arbitrator, Gulf
Cooperation Council.
1
Hamid Mehran & Lindsay Mollineaux, FED. RESERVE BANK OF N.Y., STAFF REP. NO. 539,
CORPORATE GOVERNANCE OF FINANCIAL INSTITUTIONS 1 (2012).
2
Id.
3
Id. at 13.
4
Maher Hasa n & Jemma Dridi, The Effects of the Global Crisis on Islamic and Conventional Banks: A
Comparative Study 33 (Int’l Monetary Fund, Working Paper No. 201, 2010).
5
I.e., The U nited Arab Emirates, The State of Bahrain, The Kingdom of Saudi Arabia, The
Sultanate of Oman, The State of Qatar, and The State of Kuwait. Secretariat Genera l, Countries
Name[s], THE COOPERATION COUNCIL FOR THE ARAB STATES OF THE GULF, http://www.gcc-
sg.org/eng/indexc64c.html?action=GCC (last visited Mar. 22, 2015).

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