Islamic Finance

Philippines approves bill on Islamic banks regulation & organization


14 August 2018 05:19:55 PM - The House Committee on Banks and Financial Intermediaries, chaired by Rep. Ben Evardone (Lone District, Eastern Samar), on Tuesday approved a substitute bill which seeks to provide for the regulation and organization of Islamic banks.

The unnumbered bill substituted House Bill 3975 authored by former President and now Speaker Gloria Macapagal-Arroyo and HB 492 by Rep. Sitti Djalia Turabin-Hataman (Party-list, AMIN).

Evardone said the approval of the substitute bill will complement the passage of the Bangsamoro Organic Law. "This will help further the efforts to help our Muslim brothers in Mindanao and elsewhere in the country," said Evardone.

Rep. Amihilda Sangcopan (Party-list, AMIN), in behalf of her party-list, congratulated the committee on the passage of the legislative measure. She said that with this bill, the Philippines will be one of the countries in the ASEAN with Islamic banks.

The bill declares that the State recognizes the vital role of Islamic banking and finance as well as the creation of opportunities for greater financial inclusion especially for the under-served Muslim population.

The measure refers to Islamic banking business as a banking business whose objectives and operations do not involve interest (riba) which is prohibited by the Shari'ah and which conducts its business transactions in accordance with Shari?h principles.

It provides that the Monetary Board may authorize the establishment of Islamic banks. It may also authorize conventional banks to engage in Islamic banking arrangements, including structures and transactions, through a designated Islamic banking unit within the bank provided that the Islamic banking unit is separate from its conventional banking transactions.

The Monetary Board may also authorize a foreign Islamic bank to establish banking operations in the Philippines under any of the modes of entry provided under Republic Act No. 7721 or "An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes", as amended.

The Bangko Sentral ng Pilipinas shall regulate and supervise the operations of Islamic banks. Islamic banks shall be licensed and regulated in the same manner as a universal bank. The BSP shall also issue the necessary rules and regulations on Islamic banking.

Moreover, it shall be the responsibility of an Islamic bank to ensure its compliance with Shari’ah principles. It shall constitute its Shari’ah advisory council composed of persons who are qualified in the Shari’ah or who have knowledge or experience in Shari’ah banking, finance, law or such other related disciplines.

Islamic banks may also perform the following services: 1) accept saving accounts for safekeeping or custody with no participation in profit and loss except unless otherwise authorized by the account holders to be invested; 2) act as correspondent of banks and institutions to handle remittances or any fund transfers; 3) accept drafts and issue letters of credit or letters of guarantee, negotiate notes and bills of exchange and other evidence of indebtedness; 4) provide financing with or without collateral by way of leasing, sale and leaseback, cost-plus profit sales arrangements, and other Shari’ah compliant financing contracts and structures; and 5) other banking services as may be authorized by the Monetary Board.

Islamic banks created under the Act shall comply and conform with pertinent laws, rules, and regulations applicable to private corporation engaged in banking, such as the Corporation Code of the Philippines, and the requirements of the respective regulatory agencies.

The substitute bill is co-authored by Chairman Evardone, Reps. Sangcopan, Gus Tambunting (2nd District, Para?aque), Henry Oaminal (2nd District, Misamis Occidental), Jorge Almonte (1st District, Misamis Occidental), Ma. Theresa Collantes (3rd District, Batangas), Jocelyn Limkaichong (1st District, Negros Oriental), Orestes Salon (Party-list, AGRI), Julieta Cortuna (Party-list, A TEACHER), Wilfredo Caminero (2nd District, Cebu), and Tom Villarin (Party-list, AKBAYAN)./ Novel Paller


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