UAE drafts new Islamic finance law

The UAE plans to establish a higher Sharia council to supervise the state's Islamic finance sector, replacing a federal law from 1985, a senior government official said on Tuesday.

Obaid Humaid Al Tayer, minister of state for financial affairs, told government body the Federal National Council (FNC) that it had been a long time time since the law was introduced, whilst the Islamic finance sector had rapidly expanded in the Emirates.

"Experience has proven that the individual Sharia boards within the Islamic financial institutions are more efficient," said Al Tayer, UAE daily Gulf News reported on Wednesday.

"Islamic banks have grown from two in 2000 to seven in 2007, and we are still considering licensing the conversion of some institutions."

Islamic banks in the Gulf state account for 170 billion dirhams ($46 billion) of total banking assets, or 13.5%, a ratio similar to that of Malaysia.

Only one new Islamic banking licence for the emirate of Ajman has been isssued, while the number of Islamic investment companies has grown from one in 2000 to ten in 2007, Al Tayer added.

Sultan bin Nasser Al Suwaidi, governor of the UAE Central Bank, said that it would prefer to not interfere in the operations of Islamic banks.

"We only monitor errors and risks while applying internationally recognised standards, providing for periodic inspection reports, and we did not recognise any risks or wrongdoing in the activities of the Sharia boards within Islamic financial institutions," Al Suwaidi told the FNC.