The Bangko Sentral ng Pilipinas said over the weekend it approved a new policy on minimum capitalization requirement for the operation of Islamic banking units in the Philippines.
The modified policy allows conventional commercial banks or subsidiary banks of a universal bank—which meet the minimum capital requirement for their respective banking category—to operate an Islamic banking unit within a transitory period not exceeding five years.
BSP Governor Felipe Medalla said the policy provides more flexibility in licensing of an Islamic banking unit of qualified conventional banks.
“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,” Medalla said.
Qualified conventional banks with Islamic banking units will also be accorded prudential relief in meeting the minimum capital requirement which will be based on the actual number of branches/units being used in Islamic banking operations.
The application of BSP’s enforcement framework provides prudential safeguards to ensure accountability on the committed business plan and capital build-up plan after the transitory period of covered banks with Islamic banking units to promote market discipline in the financial system.
The BSP said it intensifying its efforts to establish an inclusive and sustainable Islamic finance ecosystem in the country. The BSP’s prudential regulatory reforms on Islamic banking cover licensing, Shari’ah governance, liquidity risk management and reporting guidelines, which were recently issued under BSP Circular No. 1139.
Policy studies in the pipeline include research on profit sharing investment accounts, minimum capital requirements of Islamic banking units and the capital adequacy ratio of Islamic banks and Islamic banking units.
Al Amanah Islamic Investment Bank of the Philippines is the only bank authorized to offer Islamic banking in the country.