Banking & Finance

SGMA Bill regulating Islamic Banking in PHL Hurdles Final Reading

Date: 27 November 2018; Type: Legal News; Source: House of Representatives

The House of Representatives, voting 121-0 without abstention, approved on third and final reading House Bill 8281 or “An Act Providing for the Regulation and Organization of Islamic Banks” which is authored by former President and now Speaker Gloria Macapagal-Arroyo.

Speaker Arroyo said the lack of effective access to responsive financing is one of the main challenges to the growth and development of Micro, Small and Medium Enterprises (MSMEs) in the country.

“This obstacle is doubly experienced by our Filipino Muslim entrepreneurs in the Autonomous Region in Muslim Mindanao (ARMM)-Bangsamoro Region and in different parts of the country with the absence of banking and financial services that are compliant with the principles of Shari’ah or Islamic law,” said Speaker Arroyo.

She said Islamic banking and finance in the Philippines is limited by three major challenges: 1) lack of a clear and regulatory framework for Islamic banking and finance, where existing laws do not provide for the policy infrastructure needed to enable Islamic banks to thrive and current tax laws also subject Islamic financing products to more taxes; 2) lack or scarcity of experts on Islamic banking and finance; and 3) lack or very low investor awareness and acceptance of Islamic banking and finance.

“According to the BSP, Islamic banking is the fastest growing component of the financial services worldwide. It continues to grow by 21 percent despite the challenging global context,” said Speaker Arroyo.

She said there are more than 600 Islamic financial institutions operating in more than 75 countries and almost all major multinational banks offer Islamic financial services.

“However, there is only one Islamic bank in the country-the Al-Amanah Islamic Investment Bank of the Philippines established in 1973. Thus, it is time to provide an environment where more of our IV entrepreneurs can thrive and prosper, and tap their full potential to help develop the ARMM/Bangsamoro Region and the whole country as well,” said the Speaker.

The bill declares that the State recognizes the vital role of Islamic banking and finance in creating opportunities for greater financial inclusion especially for the underserved Muslim population in expanding the funding base for small and medium-sized enterprises as well as large government infrastructure through financial arrangements with risk sharing as their core element.

The State also recognizes the role of Islamic banking and finance in contributing to financial stability through the use of financial contracts and services that are founded on risk sharing rather than speculation in compliance with Shari’ah principles.

The bill mandates the Bangko Sentral ng Pilipinas (BSP) to exercise regulatory powers and supervision over the operations of Islamic banks. The BSP shall issue the implementing rules and regulations on Islamic banking.

Islamic banks may exercise the general powers of a universal bank that are consistent with the principles of Shari’ah.

The measure also provides that the Monetary Board may authorize the creation of Islamic banks and the 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.

Likewise, the Board may authorize foreign Islamic banks to establish Islamic banking operations in the Philippines under any of the modes of entry provided for under Republic Act No. 7721, as amended, otherwise known as “The Liberalization of Entry and Operations of Foreign Banks.”

Islamic banks shall be allowed to perform banking services, such as accepting or creating current, savings accounts and investment accounts, foreign currency deposits, and shall act as a correspondent banks and institutions to handle remittances or any fund transfers, accept drafts and issue letters of credit or letters of guarantee, negotiation notes and bills of exchange, evidence of indebtedness, among others.

Islamic banks shall comply with pertinent laws, rules and regulations applicable to private corporations engaged in banking, such as “The Corporate Code of the Philippines” (Batas Pambansa Blg. 68), as amended.

Islamic banking units shall be operated and managed pursuant to a management and organizational structure which should be properly disclosed and segregated from the operations of the parent bank.

The capitalization requirements of an Islamic banking shall be equal to that prescribed by the BSP for a universal bank. The BSP shall take the necessary steps to have the shares of stock listed to any duly registered stock exchange.

In addition, the BSP shall prescribe prudential regulations and standards of conduct to promote the sound financial position of Islamic banks and to ensure integrity, professionalism, and expertise in the conduct of their business, affairs, and activities.

These standards shall take into consideration international best practice and principles relating to, but not limited to capital adequacy, liquidity, corporate governance, risk management, related party transactions, maintenance of reserve funds, prudential reporting, investment ceiling and limitations, prevention of an institution from being used intentionally and unintentionally, for unlawful activities and consumer protection.

The government shall endeavor to achieve neutral tax treatment between Islamic banking transactions and equivalent conventional banking transactions within the provisions of the National Internal Revenue code of 1997 (Republic Act No. 8424), as amended.

Any director, officer, employee, auditor, or agent of an Islamic bank who is found guilty of any act or omission in violation of any provision of the Act and its implementing rules and regulations shall be subjected to the sanctions and penalties under Section 34, 35, 36 and 37 of Republic Act No. 7653, and shall be punished by a fine not exceeding P 1 million or by imprisonment of not more than five years, or both, at the discretion of the court, without prejudice to administrative and criminal sanctions that may be imposed pursuant to existing banking laws and regulations.

The government shall provide programs for increased consumer awareness and capacity building required by the expanded Islamic banking system

The bill is also authored by former Rep. Sitti Djalia Turabin-Hataman, Reps. Ben Evardone, Amihilda Sangcopan, Gus Tambunting, Henry Oaminal, Jorge Almonte, Ma. Theresa Collantes, Jocelyn Limkaichong, Luis Ferrer, Orestes Salon, Julieta Cortuna, Wilfredo Caminero, Tom Villarin, Anthony Bravo, Enrico Pineda, and John Marvin Nieto.

Notice: The Publishers of Asean LIP acknowledge the permission granted by the relevant official/ original source for the reproduction of the above/ attached materials. You shall not reproduce the above/ attached materials in whole or in part without the prior written consent of the Publishers and/or the original/ official source. Neither the Publishers nor the official/ original source will be liable for any loss, injury, claim, liability, or damage caused directly, indirectly or incidentally to errors in or omissions from the above/ attached materials. The Publishers and the official/ original source also disclaim and exclude all liabilities in respect of anything done or omitted to be done in reliance upon the whole or any part of the above/attached materials. The access to, and the use of, Asean LIP and contents herein are subject to the Terms of Use.

Get ASEAN LAW ALERT

Legal updates by e-mail. It's Free.

INDUSTRY UPDATES

House Panel to probe 'Budget Anomalies' in January

MANILA, Dec 13 (PNA) - The House of Representatives rules committee will start its investigation on the alleged “budget anomalies and questionable allocations” by the Department of Budget and Management (DBM) on January 3, Majority Leader Rolando Andaya Jr. announced on Thursday.

Read More

INDUSTRY UPDATES

ASEAN launches Safe Migration Campaign

Jakarta, Dec 12 (ANTARA News) - The Association of Southeast Asian Nations (ASEAN) has launched a safe migration campaign to increase public awareness of the advantages of employing migrant workers.

Read More

INDUSTRY UPDATES

Nation celebrates Universal Declaration of Human Rights

Government agencies and diplomatic and international organisation representatives gathered in Vientiane to mark the 70th anniversary of the Universal Declaration of Human Rights and its lasting impact, which was supported by the United Nations, European Union and Australia.

Read More

INDUSTRY UPDATES

SC welcomes Malaysia's Improved Ranking in Corporate Governance

KUALA LUMPUR, Dec 13 (Bernama) - The Securities Commission Malaysia (SC) is encouraged by the recognition of Malaysia's initiatives to improve corporate governance, which was a result of the collective effort by various stakeholders.

Read More

INDUSTRY UPDATES

MyCC to identify Anti-Competitive Elements in Eggs Market

KUALA LUMPUR, Dec 13 (Bernama) - The Malaysia Competition Commission (MyCC) is working closely with the Ministry of Domestic Trade and Consumer Affairs (MDTCA) to identify any anti-competitive elements that may occur in the domestic market for chicken eggs.

Read More

INDUSTRY UPDATES

MITI, MIDA, Intel hold IoT Forum to review Progress

KUALA LUMPUR, Dec 12 (Bernama) - The Ministry of International Trade and Industry (MITI), Malaysian Investment Development Authority (MIDA) and Intel Malaysia conducted the Internet of Things (IoT) Malaysia Forum 2018 yesterday to review IoT’s progress since its introduction five years ago.

Read More

INDUSTRY UPDATES

Unions request Government to set Workers’ Minimum Wage

Unions have asked the government to set the minimum wage for the construction and service sectors and to solve the five other major problems facing them, a statement released on International Human Rights Day on Monday said.

Read More

INDUSTRY UPDATES

Dewan Rakyat adjourns, Reform Agenda implemented - Speaker

KUALA LUMPUR, Dec 11 (Bernama) - The reform agenda of the Parliament was implemented at the second meeting of the first term of the 14th Parliament which came to a close today after sitting for 30 days since Oct 15.

Read More

INDUSTRY UPDATES

Court proposes Mediation in Theresa Kok's Suit against Jamal

KUALA LUMPUR, Dec 11 (Bernama) - The High Court today proposed that Primary Industries Minister Teresa Kok who filed a libel suit against Datuk Seri Jamal Md Yunos over alleged misuse of Yayasan Warisan Anak Selangor (Yawas) funds, resolve the case via mediation.

Read More

INDUSTRY UPDATES

Vietnam, Laos boost Judicial Cooperation

Hanoi, Dec 10 (VNA) - Vietnamese Minister of Justice Le Thanh Long and his Lao counterpart Xaysi Santivong agreed to work closely together to launch a bilateral cooperation programme for 2019, during their talks in Hanoi on December 10.

Read More

INDUSTRY UPDATES

Nation marks Constitution Day

BANGKOK, 10th December 2018 (NNT) - Today marks National Constitution Day, observing the importance of the administrative document and celebrating its 20 incarnations throughout the democratic history of Thailand.

Read More

INDUSTRY UPDATES

Court has Final Say on Trillanes' Travel Abroad: DOJ

MANILA, Dec 10 (PNA) - Justice Secretary Menardo Guevarra on Monday said the Bureau of Immigration (BI) will not prevent Senator Antonio Trillanes IV from traveling abroad if no travel ban is handed down by the courts against him.

Read More

INDUSTRY UPDATES

Government concerned about Readiness of SMEs to adopt Industry 4.0

KUALA LUMPUR, Dec 10 (Bernama) - The Government is concerned about the readiness of local industries, particularly Small and Medium Enterprises (SMEs), to adopt Industry 4.0.

Read More

INDUSTRY UPDATES

Memorandum of Understanding between Bank Negara Malaysia and Dubai Financial Services Authority

On 28 November 2018, Bank Negara Malaysia (BNM) and Dubai Financial Services Authority (DFSA) had signed a Memorandum of Understanding (MoU) on supervisory cooperation for effective supervision of banking and insurance/ takaful/ reinsurance institutions operating in both countries.

Read More

INDUSTRY UPDATES

DFA holds first ever Gender and Development Assembly

MAKATI, Dec 6- As part of the Department of Foreign Affairs’ (DFA) programs to continually mainstreaming gender and development (GAD) policies in its programs and activities, it hosted the agency’s first ever Gender and Development (GAD) Assembly at the Makati Diamond Residences on 06 to 08 November 2018.

Read More