BSP approves rules on creation of Islamic banks

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has issued the guidelines on the establishment of Islamic banks and banking units in the Philippines.

BSP officer-in-charge Chuchi Fonacier said the central bank approved the rules and regulations through Resolution 1945 issued last Dec. 13.

“The BSP recognizes the importance of lslamic banking as an alternative business model to promote its financial inclusion agenda. In this respect, the BSP aims to promote an lslamic banking system that can operate alongside the conventional banking system, and an open approach where conventional banks operate lslamic banking units,” Fonacier said.

The BSP approved the preliminary policy initiatives to jumpstart the ensuing 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.

The law signed last Aug. 22 became effective last Sept. 15, providing 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 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.

The regulations resounded the BSP’s promotion of strong corporate governance and consumer protection cover the licensing framework on the establishment o f Islamic banks and banking units (IBUs).

It also shows the BSP’s expectations on the Shari’ah governance framework for Islamic banks and 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 central bank said.

The regulations cover the establishment of other Islamic banks as the new law allows other Islamic banking players, either full-fledged Islamic banks or Islamic banking windows, to operate in the Philippines.

Conventional banks, whether domestic or foreign banks, will be allowed to open Islamic banking unit or to establish a subsidiary Islamic bank, while foreign banks can operate in the Philippines under any of the modes of entry provided under the law.

The Islamic bank shall constitute its Shari’ah Advisory Council (SAC) composed of persons who are qualified and have knowledge or experience in Shari’ah and in banking, finance, law or such other related disciplines.