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Deputy Governor of the Bangladesh Bank Nurun Nahar on Wednesday said that introduction of external Shariah review and fiduciary ratings would be considered seriously. 

‘It will increase transparency, enhance market discipline, and improve confidence among depositors and regulators. Moreover, the call for structured training, competency development, and Shariah awareness programs is aligned with our priorities for building a resilient Islamic banking ecosystem,’ she said.

Nurun Nahar, also Bangladesh Institute of Bank Management executive committee chairman, made the remarks while speaking at a research workshop on ‘Operational Risk Management in Islamic Banks: Best Practice and Evaluation’ at the BIBM conference room in the city. 

BIBM associate professor Md Mahabbat Hossain, associate professor Alamgir, additional director of the Bangladesh Bank IBRPD Md Rabiul Karim, senior vice-president of the IBB PLC Md Atiqur Rahman Khan Khadem and BIBM lecturer Md Emon Arefin delivered the presentation on research.

BIBM professor and director (training) Mohammad Tazul Islam delivered the welcome speech while BIBM director general Md Mahbuibul Haque delivered the speech as session chair.

At the research paper, the BIBM laid emphasis on strengthened governance structures, modernised systems, enhanced human capacity and updated regulations of Bangladesh’s Islamic banks.

It observed that recent findings concerning the operational framework of Islamic banks in Bangladesh highlighted critical deficiencies in both Shariah compliance oversight and internal auditing, prompting strong recommendations for comprehensive institutional reform. 

The institution suggested that these banks must transition from a fragmented, compliance-driven approach to an institution-wide, data-driven, and Shariah-embedded operational risk framework.

The BIBM mentioned that a key concern raised is the structure and authority of the Internal Shariah Audit (ISA).

‘The ISA is reported to frequently lack operational independence and institutional authority. Furthermore, both the Shariah Supervisory Council (SSC) and the ISA often encounter internal resistance and management influence,’ it added.

The BIBM noted that the engagement of the SSC itself remains uneven, with involvement sometimes being reactive rather than proactive.

It mentioned that a primary recommendation is ensuring the ISA’s functional independence by requiring it to report jointly to the SSC and the Audit Committee of the Board. 

‘The role of the SSC must also be significantly enhanced. The SSC should be directly involved in various critical areas, including policy formulation, system vetting, product approval, and post-execution reviews. Additionally, requiring SSC participation in Board Risk Management Committee (BRMC) meetings is seen as crucial for enabling the Council to influence policy-level decisions,’ it added.

To improve oversight efficiency, BIBM explained that the sources advocated for the expansion of ISA coverage towards population-based audits. A shift towards automated Shariah auditing using system logs is also recommended, moving practices into the modern data era, it added.

To ensure the SSC can effectively manage evolving standards, BIBM mentioned that it is vital to provide SSC members with capacity-building and Continuous Professional Development (CPD) programs to keep them updated with global standards.

In her speech, Nurun Nahar said that operational risk has evolved into a defining concern for the modern banking industry. 

‘With technology-driven processes, increased regulatory scrutiny, and rising customer expectations, the operational risk landscape has become more complex than ever. For Islamic banks, this complexity is further amplified by the requirement to ensure full compliance with Shariah rules across every process, product, and transaction. This dual compliance—regulatory and Shariah—is both a responsibility and a strategic differentiator,’ she added.

She said the report prepared by the research team underscores several critical issues. ‘It shows that while Islamic banks have made progress in adopting structured operational risk frameworks, significant gaps remain. The study finds insufficient integration between Shariah governance and the operational risk function, inadequate documentation and contract management processes.

 Many institutions lack a systematic approach to Key Risk Indicators, business continuity, and technology-driven surveillance. These limitations expose Islamic banks to heightened Shariah non-compliance risk—an area that the IFSB clearly identifies as an integral component of operational risk,’ she added.

She stated, ‘The findings also reflect a pressing need to modernize ORM practices. As the report notes, operational lapses in product structuring, documentation errors, weaknesses in ICT systems, and constraints in internal audit and Shariah audit capacity continue to contribute to operational losses.’ 

She said that the growing demand of Islamic banks, coupled with their increasingly sophisticated business models, demands stronger risk governance, disciplined process automation, and a culture of accountability throughout the institution.

She said, ‘I want to emphasize that Bangladesh Bank expects Islamic banks to elevate their ORM frameworks to match global standards, particularly the updated requirements of Basel III and IFSB principles.’ 

Banks should enhance their risk architecture by adopting real-time operational dashboards, standardising Shariah-compliant documentation, strengthening Internal Shariah Audit (ISA), and ensuring that Boards and Senior Management actively oversee operational and Shariah risks, she added.

Integrating technology — especially in workflow automation, error detection, and contract execution — must be a priority, she added.