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The United Arab Emirates plans to develop an independent authority which will supervise the country's Islamic finance industry, backed by specific legislation, central bank governor Sultan Nasser al-Suweidi said on Wednesday.
A centralised approach to supervising Islamic finance is increasingly being adopted around the globe, as regulators try to standardise industry practices and improve consumer perceptions.
"We will have a sharia authority or a board, that will be outside the central bank," Suweidi told Reuters on the sidelines of the World Islamic Economic Forum in London.
Legislation which is being developed by the UAE government would enhance the authority's ability to influence industry practices.
"There is a law that is going to be out...I will not give a time frame but normally those take one year, one year and a half in the UAE," Suweidi said.
Sharia boards are groups of scholars which rule on whether financial instruments and activities are religiously permissible. Gulf countries have in the past tended to follow a loose, decentralised model of Islamic finance regulation, leaving much of it to sharia boards at individual banks and finance firms.
But the rulings of different sharia boards can be inconsistent or leave scholars open to suggestions of conflicts of interest. So in recent months some countries, including Oman, Pakistan, Morocco and Nigeria, have followed Malaysia's example by introducing a central sharia board that can impose its will around the country.
Dubai's decision could help its drive to become a global centre for Islamic business; it wants to develop a set of standards, not just in finance but also in other areas such as halal food processing, which would become accepted internationally.
The UAE has been ranked as having the worlds second most developed Islamic economy ecosystem following Malaysia
The banks said that it is working closely with the central bank in setting up a Higher Sharia Authority that would complement and oversee the work of individual sharia boards.
Islamic banking assets in the Emirates crossed $1 billion in 2014, a new report says.
It would be the third purchase by the privately-owned investment firm in the non-banking financial services sector in recent months.