Strengthening the robustness of the corporate governance framework and practices has become even more important in today's environment of greater uncertainty and heightened risks. Indeed, it is timely that efforts are focused to strengthen the corporate governance in Islamic financial institutions given the wider range of contracts entered into by the Islamic financial institutions and their customers that inherent in Islamic finance. In particular, the efforts should include the formation of an appropriate governance structure of the institution and the requirement for full disclosure. My remarks today will focus on five key areas important for securing an enhanced governance framework for the Islamic financial institutions that takes into account the role and responsibilities of the shareholders. My presentation will also touch on the experience and approach that Malaysia has adopted to secure a robust governance framework for the Islamic financial institutions. Firstly, the task is to ensure the design and implementation of the corporate governance strategy should not impose a regulatory burden to the business objectives and the growth potential. In designing and implementing corporate governance standards and core principles for Islamic financial institutions, the challenge is to formulate a framework that does not only take into account the unique characteristics peculiar to Islamic financial business, but that fosters innovation and competition thereby support the growth potential of the industry. Essentially, the design and strategies needs to secure the twin objectives of achieving continuous business performance and robust corporate accountability.

It also includes having in place the nominating and remuneration committee to ensure the right persons for the job are appointed and that the reward or penalty are commensurate with the accountability and performance. Indeed the prophet refers to this in the words, "whoever employs a person out of favouritism and there is someone who is better than that person, he has committed breach of trust with God, His prophet and all Muslims". The risk management committee needs to review the risks peculiar to Islamic finance and consider the means by which they should be managed. Expertise needs to be developed to address the audit for the Shariah risk. The audit committee therefore needs to examine not only the risks associated with banking operations, but also complementing the Shariah Committee in ensuring full compliance with the Shariah principles. The role of the Shariah committee may also be expanded beyond product approval, in particular to strengthen the governance of the Islamic financial institutions by ensuring for each new product, proper disclosure is made and the rights of the customers and the responsibilities of the Islamic banking institutions are clearly provided. Fourthly, the role of the regulator in strengthening the standards and best practices in inculcating good governance. The government and regulator has an important role in putting in place an enabling environment that supports the development of a strong governance structure and that provides for enforcement. In Malaysia, corporate governance reform is a priority agenda.