BSP approves easier rules on Islamic banking
MANILA, Philippines — The Bangko Sentral ng Pilipinas approved simpler prudential regulatory guidelines in establishing lslamic banks and Islamic banking units, an industry seen as a potential driver of financial inclusion in the country.
Islamic banking, as defined in Republic Act 11439, refers to a banking business with objectives and operations that do not involve interest, which is prohibited by the Islamic or Shari’ah Law. An Islamic bank conducts its business following the principles of the Shari’ah.
READ: BSP pushes for more Islamic banking reforms
Under the amended rules, the BSP removed the “reasonable transitory period not exceeding five years” that was previously meant to check the compliance of new Islamic banks and banking units with the minimum capitalization requirement.
New Islamic banks and banking units are also no longer required to submit their capital buildup plan no later than six months before the end of the transitory period.
Continuing requirements
But these entities would still have to submit prudential reports to the BSP. There would be an observation period of up to three years from the beginning of Islamic banking operations to allow them to familiarize with the data requirements and prescribed guidelines and to make the necessary system adjustments.
At the same time, the proposed amendments would just require an Islamic banking unit of a conventional bank to just consolidate its liquidity positions, activities and transactions into the bank-wide reports. This is instead of submitting a separate report to the BSP.
READ: BSP relaxes Islamic banking setup requirements further
The opening of a new branch or branch-lite unit will be subject to the payment of the prescribed processing fees based on the banking category. However, the opening of Islamic banking units in existing branches or branch-lite units will not be subject to any fee.
Unbanked population
BSP data showed that 29 percent of the cities and towns in the Philippines remain unbanked. The Bangsamoro Autonomous Region in Muslim Mindanao is the most unbanked region.
Islamic banking and finance can promote inclusive finance by making it available to groups that avoid using existing conventional banking facilities due to their faith.
It can also be attractive to non-Muslims, particularly investors within or outside the Philippines who may be looking for new asset classes, instruments and products to diversify their portfolios. /dda
