UAE to issue new law on Islamic finance activities

Abu Dhabi: The UAE plans to replace the federal law issued in 1985 with a new one establishing a higher Sharia Council to supervise Islamic finance activities in accordance with Islamic precepts, a top official said on Tuesday.

"It has been a very long time since this law was introduced, and experience has proven that the individual Sharia boards within the Islamic financial institutions are more efficient," Obaid Humaid Al Tayer, UAE Minister of State for Financial Affairs, told the Federal National Council (FNC) on Tuesday.

With the rapid expansion of Islamic banks, the UAE is becoming a centre for Islamic finance.

"Islamic banks have grown from two in 2000 to seven in 2007, and we are still considering licensing the conversion of some institutions, and only one new licence for the emirate of Ajman was issued, while the number of Islamic investment companies has grown from one in 2000 to ten in 2007.

"This shows that the sector is growing consistently," Sultan Bin Nasser Al Suwaidi, governor of the UAE Central Bank, said.

In terms of assets and liabilities, Islamic banks account for Dh170 billion of total banking assets, or 13.5 per cent, a ratio similar to that of Malaysia.

"As a central bank we would rather 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.

Replying to a question by an FNC member, Al Tayer requested a detailed discussion on the country's monetary policy, especially pegging the dirham to the dollar at a closed session.