The Importance of Shariah Governance in the Banking Industry in Saudi Arabia and the Case of Shariah Committee Members as Related Partie

Abstract

Background: Saudi Arabia has become an important economic player in the world. Based on this strategic importance, the banking sector had to keep pace. As a result, the Shariah Governance Framework was put in place in February 2020, as banks in Saudi operate in accordance with the requirements of Islamic laws. Therefore, shariah governance is important in the Islamic banking industry, The Shariah Governance framework was issued to control the growth in financial assets, and the first issuance of such a framework needed comprehensive studies. Therefore, due to the lack of local and international research focused on the Saudi corporate governance infrastructure, specifically related parties, the significance of this paper lies in the academic impact and the impact it has on the field practitioners, as it will try to identify the concept of shariah committee members and their re-addition as related parties and disclosures. This research paper aims to study a key principle in corporate governance, that is, the conflict of interest that can be defined under Related Parties Transactions. Specifically, this study will focus on the Shariah Committee Members as Related Parties in the Banking sector in Saudi Arabia. Methods: The researchers used primary and secondary resources. Results: This paper concludes with some findings related to the Shariah Governance Framework and the narrowed topic of this paper, which is the Shariah committee members as related parties. Although it was an important step to re-add the members, there is a need to improve the current regulatory structure.