Sharia Supervisory Board (SSB)
A Sharia Supervisory Board is the panel of scholars responsible for reviewing and overseeing an Islamic financial institution's compliance with Sharia — approving products and contracts, issuing rulings and reviewing whether operations follow them.
Also called: Sharia board · Shariah committee · Shariah Supervisory Board · Shari'ah board
An SSB typically approves new products and their documentation, issues rulings or fatwas on questions put to it, oversees internal Sharia review and audit, and reports on whether the institution's activities during the year complied with its rulings. Its opinion is what entitles a bank, fund or sukuk issue to call itself Sharia-compliant.
How SSBs are appointed and what they may decide depends on the jurisdiction. Some regulators set out governance requirements for them; some, such as Malaysia, also have a central Sharia authority whose rulings bind institutions and courts, so the institution's own committee works within that framework. AAOIFI and the IFSB both publish Sharia governance standards.
Conflicts of interest are a recurring concern, because a relatively small number of scholars sit on many boards and are paid by the institutions whose products they approve.
In practice
An SSB's approval is a religious-compliance opinion, not regulatory approval. A Sharia-approved product still needs whatever licence, disclosure and consumer-protection compliance the local law requires.
Commonly confused with
| Term | How it differs |
|---|---|
| Fatwa | A fatwa is a ruling. The SSB is one of the bodies that issues rulings, and also oversees whether the institution follows them. |
See also
- FatwaA fatwa is a scholarly legal opinion on a question of Islamic law. In finance it is the ruling — from an individual scholar, an institution's Sharia board or a national authority — that a product, structure or transaction is or is not compliant.
- AAOIFIAAOIFI, the Accounting and Auditing Organization for Islamic Financial Institutions, is a Bahrain-based international standard-setter whose Sharia, accounting, auditing, governance and ethics standards are widely used in Islamic finance.
- IFSBThe IFSB, the Islamic Financial Services Board, is a Kuala Lumpur-based international body that issues prudential and supervisory standards for Islamic banking, Islamic capital markets and takaful, much as the Basel Committee does for conventional banks.
- Sharia Non-Compliance RiskSharia non-compliance risk is the legal, financial and reputational risk an Islamic financial institution faces if it fails to comply with the Sharia rules that apply to it — through a flawed product, a contract executed out of sequence or income it cannot keep.
- Islamic WindowAn Islamic window is a Sharia-compliant business run inside a conventional financial institution — a division, branch network or product line — usually with segregated funds, accounts and Sharia governance.