Abdul Rasheed Ghaffour: Practical aspects of dispute resolution in Islamic finance facilities Remarks by Mr Abdul Rasheed Ghaffour, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Association of Islamic Banking Institutions Malaysia (AIBIM) Law Seminar on "Practical Aspects of Dispute Resolution in Islamic Finance Facilities", Kuala Lumpur, 14 November 2017. * * *  “Past, present and future: Legal certainty and Islamic finance in Malaysia” It is my honour to join all of you today in exploring this interesting topic on the practical aspects of dispute resolution in Islamic finance. This seminar marks another significant step in fostering dialogue between Islamic financiers, Shariah scholars and the legal fraternity. Gatherings such as this serve as an important platform for Islamic finance practitioners to develop a better grasp of legal issues, and for lawyers to gain a keener sense of Islamic finance. I am encouraged to see the Association of Islamic Banking Institutions Malaysia (AIBIM) taking the lead in advancing this mission. Disputes in business transactions have been around for as long as commerce itself. It is therefore no surprise that we come across judges and lawyers very early on in human history. Earlier than bankers – and definitely long before we see the first central banker . Disputes are bound to happen. One party may not be able or willing to honour their obligations. The other party may be dissatisfied with how an obligation is performed.
If bank supervision works well in your country, let it be as is and strengthen the other sector supervisors instead. Operational independence should be implemented and at the same time rules for accountability and transparency. This is more important than the structure of the supervisory authorities. If you see good reasons in your country for changing the supervisory structure, you should follow a transparent process and be clear of the consequences. For obvious reasons, you must avoid making organisational changes when the financial sector is weak. Nor should you change during major developments in the financial sector, such as the introduction of the bank capital framework Basel II and the new accounting standard IAS 39. The structural change must be accompanied by measures to strengthen the capacity of the new authority. Otherwise the change is merely cosmetic. In many countries there is a political pressure to change the supervisory structure to show expediency, in particular when there has been a financial crisis and irrespective of the supervisory agencies’ roles and behaviour before and during the crisis. As a result banking supervision may in such cases be moved out of the central bank or, at other times, into it. Also the unification of the supervisory authorities is sometimes seen as a political issue. In my experience, there is not much to gain from a political point of view. On the contrary, the politicians might be blamed for future failures of supervision.