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Friday, March 29, 2024

Bangko Sentral approves introductory regulations on Islamic banking in PH

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The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, approved the introductory regulations on Islamic banks and the establishment of Islamic banking units in the country to encourage wider investor and consumer participation.

The Bangko Sentral said in a statement the board approved the preliminary policy initiatives to jumpstart the implementation of Republic Act No. 11439, or An Act Providing for the Regulation and Organization of Islamic Banks, and the relevant provisions on Islamic banking under R.A. No. 11054, also known as the Organic Law for the Bangsamoro Autonomous Region in Muslim Mindanao.

R.A. 11439, which was signed into law on Aug. 22, 2019 and became effective on Sept. 15, 2019, provides the BSP with the legal authority to issue a broader set of rules and regulations on Islamic banking.

“The BSP aims to create an enabling environment that will allow Islamic banks to operate alongside the conventional banks under the same regulatory and supervisory approach, taking into consideration the unique features of the Islamic banking operations,” the board said.

“The goal is to provide a coherent, consistent and comprehensive set of regulations and standards to encourage wider investor and consumer participation on Islamic banking and finance without any regulatory arbitrage,” it said.

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The regulations, which resounded the BSP’s promotion of strong corporate governance and consumer protection, cover the licensing framework on the establishment of Islamic banks and Islamic banking units and the BSP’s expectations on the Shari’ah Governance Framework for Islamic banks and Islamic banking units.

The BSP’s existing licensing framework on the establishment of conventional banks and branches is adopted, as appropriate, with supplementary requirements relevant to Islamic banking operations and Shari’ah compliance.

The regulations will implement the legal provisions on the establishment of other Islamic banks. 

R.A. 11439 allows other Islamic banking players, either full-fledged Islamic banks or Islamic banking windows, to operate in the Philippines, subject to the approval of the Monetary Board. Conventional banks, whether domestic or foreign banks, will be allowed to open Islamic banking unit or to establish a subsidiary Islamic bank. 

Foreign banks can operate in the Philippines under any of the modes of entry provided under R.A. 7721, as amended.

R.A. 11439 provides that it is the responsibility of an Islamic bank to ensure its compliance with Shari’ah principles. The Islamic bank will constitute its Shari’ah Advisory Council composed of persons who are qualified and have knowledge or experience in Shari’ah and in banking, finance, law or such other related disciplines.

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