The Existence of Sharia Supervisory Board in Maintaining the Purpose of Sharia Principles in Sharia Banking

By Djumardin; Isnaini, Atin Meriati | Journal of Legal, Ethical and Regulatory Issues, January 1, 2018 | Go to article overview

The Existence of Sharia Supervisory Board in Maintaining the Purpose of Sharia Principles in Sharia Banking


Djumardin, Isnaini, Atin Meriati, Journal of Legal, Ethical and Regulatory Issues


INTRODUCTION

The presence of sharia banking gives a great hope in the midst of society and other commercial banks. One of the expectations is the enactment of Law Number 10 of 1998 on the Amendment of Law Number 7 of 1992 on Banking in which the government provides the widest opportunity to public to conduct business activities based on sharia principles, including the provision of opportunities for commercial banks to open branch offices, which specifically perform activities based on sharia principles.

In connection with sharia principles in Law Number 10 of 1998 on the Amendment of Law Number 7 of 1992 on Banking, sharia principles (profit sharing) is the treaty rules based on Islamic law between the bank and other parties to deposit funds/or financing operations or other activities in accordance with sharia.

In sharia banking, it is known sharia compliance, that is a compliance system having special emphasis on aspects of sharia that are based on statutory provisions in positive law, as well as internal policies and regulations contained in any sharia banking institutions.

Based on the needs of internal control system of sharia banking in terms of the implementation of the principles of sharia, it is arranged a provision regulating the necessity for an enterprise (banks in particular and companies in general) that run the business based on sharia principles to form Sharia Supervisory Board. In Article 109 paragraph (1) of Law Number 40 of 2007 on Limited Liability Company, it is stated that,

"The company that runs business Activities based on sharia principles in addition to having the Board of Commissioners shall have Sharia Supervisory Board".

In line with the idea, specifically the obligation to establish DPS in sharia banking is also regulated in the provisions of Article 32 paragraph (1) of Law Number 21 of 2008 concerning Islamic Banking stating that

"Sharia Supervisory Board shall be established in Sharia Banks and Commercial Banks that have Sharia Trade Unit."

Therefore, all the Activities of sharia banking are under the supervision of Sharia Supervisory Board. On the other hand, the provision of Article 29 (1) of Law Number 10 of 1998 on the Amendment of Law Number 7 of 1992 on Banking determines that

"The guidance and supervision of banks are conducted by Bank Indonesia. "

Therefore, there are two institutions to supervise sharia banking which in this case are Bank Indonesia and Sharia Supervisory Board. Meanwhile, if it refers to the provision of Article of Law Number 40 of 2007 on Limited Liability Company and Law Number 21 of 2008 concerning Sharia Banking, it is only found 1 (one article) in each, which regulates Sharia Supervisory Board, which are Article 32 on Sharia Banking Law and Article 109 on Limited Liability Company. To that end, the study seeks to assess the limits of authority of each supervisory institution (Bank Indonesia, DPS and Commissioner) in supervising the Activities of sharia banking with two legal issues: (1) How is the existence of Sharia Supervisory Board in the organ of Limited Liability Company on sharia Banking? (2) How does Sharia Supervisory Board account for the supervision of sharia banking?

METHOD OF STUDY

This study is a normative legal study, which is based on norms, values, legal principles, legal concepts, legal opinions and research results. Therefore, the methods used involve (Amirudin, 2012):

Approaches

Considering that this is a normative legal study, the approaches used are normative approach which includes statute approach, conceptual approach and analytical approach.

Source of Legal Material

Legal material is obtained through library research which consists of primary legal materials in the form of Laws, Government Regulations, Presidential Regulations, Regional Regulations, and others; secondary legal materials in the form of concepts, expert opinions, and research results; and tertiary legal materials in the form of language dictionaries and legal dictionaries (Soekanto, 1984). …

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