AAOIFI Governance and Ethics Board (AGEB) approves, in principle, two exposure drafts of governance standards on “Conversion of a Conventional Financial Institution into an[...]

05 July 2026

PR/10/2026

The Governance and Ethics Board (AGEB / the board) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) approved, in principle, the issuance of two exposure drafts of governance standards (GSs), namely "Conversion of a Conventional Financial Institution into an Islamic Financial Institution" and "Digital Islamic Banks", at its 46^th meeting, held on 29 June 2026 and 1 July 2026, via video conferencing.

The board also reviewed the AGEB performance report for the period from January to June 2026, and demonstrated satisfaction on the progress so far during the current year.

The exposure draft of GS __ "Conversion of a Conventional Financial Institution into an Islamic Financial Institution" aims to provide a comprehensive governance framework, while complementing the requirements of relevant AAOIFI Shari'ah Standards (SSs), to appropriately govern and implement the process of conversion of a conventional financial institution (CFI) into an Islamic financial institution (IFI). The proposed standard seeks to ensure that such conversion is carried out in a manner that upholds Shari'ah principles and rules and safeguards stakeholders' interests. It covers various aspects, including the core governance principles for conversion of a CFI into an IFI, the conversion plan, pre-commencement and ongoing considerations during the conversion process and conclusion of the conversion process.

The exposure draft of GS __ "Digital Islamic Banks" aims to prescribe the principles of governance for digital Islamic banks (DIBs), including defining the approach towards the application of the relevant AAOIFI Governance Standards (GSs). It also provides for certain flexibilities, as may be applicable due to the distinctive operating models and relatively lean structures of such DIBs, while setting out principles for suitable enhancements in the governance and control environment, considering their unique business model. The proposed standard is expected to contribute towards better safeguarding the interests of stakeholders and enhancing stakeholders' confidence in DIBs.

The board instructed the secretariat to proceed with the issuance of the exposure drafts after incorporating the changes directed by the board and completing the remaining due process.

On this occasion, Mr. Farrukh Raza, Chairman of AGEB, stated: "I would like to extend my sincere appreciation to the board members, the respective working groups and the secretariat for their dedicated efforts and continued commitment to the development of robust and practical governance standards for the Islamic finance industry". He added: "Both initiatives are timely and significant, particularly as the industry is witnessing increasing interest in conversion initiatives and rapid digital transformation. Once finalised, these standards are expected to contribute towards strengthening governance practices and supporting the sound and sustainable growth of the Islamic finance industry".

Mr. Omar Mustafa Ansari, Secretary General of AAOIFI, stated: "We believe that the development of these GSs will respond to the evolving needs of the Islamic finance industry in these two significant areas". He added: "The exposure drafts of the two GSs will be issued and published on the AAOIFI website shortly. We believe that given the significance of their respective topics, the industry stakeholders' comments and input will be very significant, and we expect broad level participation in the related upcoming public hearings and roundtable discussions".