INTRODUCTORY regulations for the establishment of the Philippines’s Islamic banking sector has been approved by the Bangko Sentral ng Pilipinas (BSP) over the weekend, the country’s central monetary authority said in a statement on Tuesday.
“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 BSP said in a statement.
This is in action to the implementation of Republic Act 11439, or An Act Providing for the Regulation and Organization of Islamic Banks, and the relevant provisions on Islamic banking under RA 11054, otherwise known as the Organic Law for the Bangsamoro Autonomous Region in Muslim Mindanao.
RA 11439, signed into law on August 22, 2019, and became effective on September 15, 2019, provides the BSP with the legal authority to issue a broader set of rules and regulations on Islamic banking.
To date, Al Amanah lslamic Investment Bank of the Philippines is the lone established Islamic bank in the country.
The introductory regulations will implement legal provisions on the establishment of 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 a Islamic banking unit or to establish a subsidiary Islamic bank,” the BSP said.
Legal provisions to Shari’ah compliance will also be implemented under the introductory regulations.
“The Islamic bank shall 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,” the BSP said. Islamic finance pertains to banking and economics that are compliant with the Islamic law of the so-called Shari’ah. One of the most salient features of the Shari’ah-compliant financial assets are the non-issuance of interest rates to borrowers.