AN OVERVIEW OF CORPORATE GOVERNANCE PRACTICES OF SELECTED ISLAMIC BANKS: CASE OF RHB ISLAMIC BANK, MASRAF AL RAYAN AND EUROPEAN ISLAMIC INVESTMENT BANK

Abstract

Complying with CG standards is not mandatory but with collapse of many financial institutions,
compliance with high standards of CG in banking operation became a necessity. This is due
to the fact that many banks and companies worldwide collapsed as a result of poor corporate
governance practices such as Bank of Credit and Commerce International (BCCI) 1991,
Enron 2001, WorldCom 2001, etc. Therefore, the objective of this paper is to examine and
ascertain whether present level of CG standards practiced by Islamic banks is adequate to
prevent the banks from collapsing. The approach of the study is to evaluate the effectiveness of
Board and the various Board Committees utilizing data published in financial statement of the
selected banks. The study finds out that the selected banks comply with CG standards adopted,
however such compliance does not mean that the board, committees will be constantly reliable.
Therefore, instilling the Islamic values such as the concepts of Ehsan, honesty, accountability is
paramount to prevent CG failures and protect banks from collapsing.

Keywords: corporate governance, Islamic banks, board, committees.