BSP relaxes Islamic banking setup requirements further

MANILA  -The Bangko Sentral ng Pilipinas (BSP) has tweaked the requirements on minimum capitalization for Islamic banking to encourage conventional banks to engage in this market segment.

For this purpose new guidelines are issued to provide more flexibility in licensing of an Islamic banking units (IBUs) of qualified commercial banks.

The guidelines allow commercial banks or subsidiary banks of a universal bank, which meet the minimum capital requirement for their respective banking category, to operate an IBU within a transitory period of up to five years.

“The BSP aims to incentivize the conventional banks to test, explore and develop the market for Islamic banking products and services with prudential safeguards to support the entry of a critical mass of Islamic banking players in the country” BSP Governor Felipe Medalla said in a statement.

Also, qualified conventional banks with IBUs will be accorded prudential relief in meeting the minimum capital requirement which shall be based on the actual number of branches or units being used in Islamic banking operations.

The BSP efforts to nurture an Islamic banking system in the Philippines has earned a citation from the Islamic Banking and Finance Institute Malaysia (IBFIM), which feted the central bank with the “Outstanding Industry Collaboration Award” last February.

IBFIM is an industry-driven learning institution that specializes in technical certifications that serve the needs of the Islamic finance industry.

The group’s key programs are developed based on a qualifications framework and are accredited by the Finance Accreditation Agency, an organization in Malaysia that certifies international financial training courses.

First given in 2018, the IBFIM Outstanding Industry Collaboration Award is conferred on local and international institutions for their outstanding collaboration with IBFIM in developing professionals in the field of Islamic finance.

BSP Assistant Governor Arifa Ala, who chairs the BSP-led Islamic Finance Coordination Forum (IFCF), said the award recognizes the BSP’s calibrated efforts and strong commitment to enhancing the competencies of BSP personnel and IFCF members on Islamic banking and finance.”

The IFCF is composed of the BSP, Asian Development Bank, Department of Trade and Industry, Securities and Exchange Commission, Insurance Commission, National Commission on Muslim Filipinos, Bureau of Internal Revenue, Bureau of the Treasury, Philippine Deposit Insurance Corp., Bangsamoro Autonomous Region in Muslim Mindanao, Philippine Financial Reporting Standards Council and Auditing and Assurance Standards Council.

Since the enactment of the Islamic Banking Law in 2019, the BSP has issued the key implementing regulations on licensing, Shari’ah governance framework, liquidity risk management and prudential reporting for Islamic banks and Islamic banking units.

So far, state-owned Al Amanah Islamic Investment Bank of the Philippines, a subsidiary of the Development Bank of the Philippines, is the sole Islamic finance specialist in the country. INQ

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