BSP eases rules for Islamic banks

Manila, Philippines – The Bangko Sentral ng Pilipinas (BSP) has relaxed rules governing Islamic banks in a bid to develop the sector.

An Islamic banking unit (IBU) refers to a division, department, office or branch of a conventional bank that conducts business in accordance with the principles of the Shari’ah.

“We want to encourage more players to enter and help develop the Philippine Islamic finance market. This supports our goals of inclusive growth and a more diverse financial sector,” BSP Governor Eli M. Remolona, Jr. said in a statement.

Under the amended rules, Islamic lenders are no longer subject to a separate capital requirement. Instead, conventional banks with IBUs will follow the capital requirements that apply to their bank category. The processing fee for an IBU license will also follow the fees corresponding to the bank’s category.

The new rules also institutionalize the three-year observation period, beginning from the launch of Islamic banking operations, for submitting prudential reports on Islamic banking operations. This gives industry players time to get familiar with the reportorial requirements.

In addition, IBUs are no longer required to submit a separate liquidity report. They can now integrate it with the bank-wide liquidity report.

The new rules are part of the BSP’s promotion of Islamic banking and finance in the Philippines, in line with Republic Act 11439, or the Islamic Banking Law. It is also consistent with efforts to make financial products and services accessible to all Filipinos.

Islamic banking and finance allow Muslims to access formal financial products and services that are compliant with Islamic teachings, including prohibition of interest. For non-Muslims, Islamic banking and finance offer alternative sources of financial services.