for management and staff in relation to corporate governance. it is also a manifestation of the institution's vision and strategy to achieve good governance whereby shareholders and other outside stakeholders are able to evaluate the level of commitment of the institution towards enhancing good governance. islam strongly advocates all forms of positive governance. the design of the framework however, should not be made in isolation of the universal values expounded in the existing governance principles and standards that are consistent with islamic principles. this framework must set out the functions of each component and level of governance in a manner to ensure accountability of each respective jurisdiction with appropriate division of powers to avoid possible conflict of interests. in this context, consideration may be given to four main ingredients important to the governance framework for islamic financial institutions. ( i ) firstly, to ensure that the guidance, standards and core principles are able to translate the values consistent with the injunctions of shariah. the core values of honesty and integrity are key ingredients of the governance framework of the islamic financial transactions with heavy reliance on the trust relationship. the significance of these core values is clearly highlighted in the qur'an, sunnah and the " fiqh ". the banking institutions, as user of public funds must act in good faith for the benefit of all stakeholders. if the relationship between the financier and entrepreneur can be built on honesty, efficiency and equity, a durable equilibrium can be established that will serve the mutual interest of both parties. ( ii ) secondly, the governance framework needs to take into account the multi - faceted role performed by the islamic financial institutions and treat all the relevant stakeholders fairly, including minority shareholders and the investment account holders. it is an embodiment of the concept of justice in islam as stated in qur'an, which is nearest to righteousness ( taqwa ) in the islamic faith. ( iii ) thirdly, that the shariah governance framework must be put in place as a additional dimension and a distinct feature in the governance structure of islamic financial institutions. this is crucial in instilling public confidence on the purity of the operations of the islamic financial institutions. the shariah board or committee therefore represents another stratum in the governance structure. the shariah committee serves to ensure that the management of the islamic banking institutions are in compliance with islamic principles. ( iv ) fourthly, the framework should promote greater transparency and higher level of disclosure to address information asymmetry of the different stakeholders in the different structures of the transactions in

appropriate. building the necessary legal and institutional framework to support the development of good corporate governance practices within the capital and financial markets is therefore an important part of the process. among the various measures initiated includes the law that provides the statutory framework to protect the interest of the depositors, customers and shareholders as well as the prudential framework to promote financial stability. this includes the legal provisions prescribing the maximum permissible shareholding limit to avoid concentration of ownership. there is also a restriction on extension of credit to related parties to avoid conflict of interest, as well as a limit on the lending to single customer. other measures include the issuance of specific guidelines on the role and responsibilities of directors and the creation of various board committees. greater emphasis is also accorded to the role of independent directors, minimum qualifications of such directors and their compensation to ensure sufficient independence to act in the best interest of the institution. in the area of shariah governance, guidelines have been issued on the governance structure of the shariah committee in the islamic financial institutions. the guidelines define the role and responsibilities of the shariah committee, which extends beyond endorsement of shariah - compliant products to also ensure that the operations of the islamic banking institution complies with shariah requirements at all times. the guidelines also prescribe the fit and proper criteria for members of the committee, and places emphasis on the independence of the committee to report directly to the board and to accord to the board the responsibility to ensure that the shariah committee can effectively discharge its duties. in addition, members of the shariah committee may not sit on the shariah committee of other islamic banking institutions as well as on the shariah advisory council of the central bank so as to preserve the confidentiality and avoid potential conflict of interests. to promote greater financial transparency and disclosure and to safeguard the interests of investment depositors, guidelines have also been issued on the model financial statement of the islamic banks. in this connection, islamic banking institutions are required to provide disclosure of information, among others, on the segregation of income and expenses from the categories of instruments including the investment of unrestricted investment deposits, restricted investment deposits and investment of shareholder's funds. islamic banking institutions are also required to disclose information on the profit equalization reserves. in addition to disclosure requirements in the financial statement, a standard framework for the calculation of the rate of return for islamic banking operations has been introduced. the framework requires islamic banks to clearly segre