A robust Shariah governance framework is another important element to assist the takaful industry in achieving full Shariah compliance in the development and application of their products and services. Given that Islamic finance has its roots in Shariah, it is an overarching requirement for an Islamic financial institution to ensure that its objectives and operations are in accordance with Shariah principles. Recent enhancements to the Shariah governance framework are aimed to assist Islamic financial institutions in meeting this overarching requirement, through further strengthening of the existing Shariah governance process, decision making, accountability and independence. Reinforcements of the Shariah compliance functions include introduction of internal Shariah review and audit requirements, supported by an appropriate risk management process and research capability. The new framework is envisaged to contribute towards evolving a more robust and sound Shariah  2  BIS central bankers’ speeches  governance framework within Islamic financial institutions, with the establishments of end-toend Shariah compliant control mechanism that promotes greater Shariah observance throughout an organisation. Effective implementation of the new Shariah governance framework will further promote stakeholders’ confidence and enhance the integrity of the Islamic financial industry, and for the takaful industry, by reducing the risk of Shariah noncompliance, takaful products would be at a more competitive edge in comparison with conventional insurance products, as discerning customers would opt for takaful as their ethical financial solutions. In respond to the ever changing business environment, it is imperative for takaful operators to enhance their institutional capabilities and operational efficiency with the aim to strengthen their competitive position.

The firm has access to a pool of liquidity providers, and will compare pre-trade price quotes, perhaps making use of proprietary TCA tools from those providing liquidity. It might execute some trades electronically. But it has bigger costs to worry about than FX trade execution alone – including the broader bundle of services it needs across asset classes. And it is conscious that larger FX trades involve material risk, including as a result of market dynamics it doesn’t necessarily understand. So it will also work to maintain broader relationships with liquidity providers – and will tend to revert to voice trading with a trusted counterparty for larger orders, or at times of heightened volatility. It may not always have complete clarity on the basis on which such trades are executed (internalised vs externally traded, principal vs agent) or rejected. And it recognises that, in seeking quotes, it may be leaking information about its position. But broadly speaking it is content with the service it receives on FX, and feels it has bigger fish to fry elsewhere. In many ways, it is hard to label this case ‘bad’. The firm is trying to inform itself about market trends. But it recognises that FX is a professional market, whose complexities it needs assistance to navigate. It knows it may not always be getting the finest price, or the perfect service – but feels that the cost/benefit case for investing in a lot of extra data or understanding is not in its favour.