BSP maintains flexibility to attract Islamic banks

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is maintaining flexibility to lure more industry players to venture into Islamic banking in the country.

In his weekly virtual press conference, BSP Governor Benjamin Diokno said they would maintain flexibility in their approach to allow banks to thrive in the new environment since Republic Act 11439 or An Act Providing for the Regulation and Organization of Islamic Banks was signed into law in 2019.

Diokno said regulatory reforms on Islamic banking licensing as well as Shariah governance and taxation have been instrumental in making the Philippines an attractive site for Islamic banking.

“The reforms convey to the market that the country fosters an open and competitive financial system that is also Shariah compliant and principles-based. This is consistent with our efforts to foster financial inclusion and a high quality of life for Filipinos,” Diokno said.

The BSP has issued policies to implement the Islamic Banking Law and the provisions on Islamic banking under the Bangsamoro Organic Law.

On the other hand, the Bureau of Internal Revenue (BIR) issued Revenue Regulation 17-2020 stating that Islamic banking transactions shall not be taxed more heavily or more lightly than conventional transactions.

Diokno said regulations in the pipeline would cover liquidity, reporting as well as capital adequacy and leverage ratios for Islamic banks or Islamic banking windows.

He said the BSP’s Supervisory Assessment Framework would also be adopted for Islamic banks.

“Islamic Banking is for Muslims and non-Muslims alike, as it is seen to appeal to investors who may want to diversify their portfolios,” Diokno said.

Diokno said the BSP has received a number of queries on how to establish an Islamic bank in the Philippines.

“These discussions are still in the exploratory stages. In addition, existing foreign and local banks may opt to operate Islamic banking units. So we plan to ask them about their future plans,” Diokno said.

Universal and commercial banks could venture into Islamic banking as the law requires a minimum capitalization of P3 billion for the establishment of a head office and P15 billion to put up branches.