The Bangko Sentral ng Pilipinas (BSP) has relaxed rules for Islamic banking units (IBUs), in line with efforts to develop the country’s Islamic banking industry.

An 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,” said BSP Gov. Eli Remolona, Jr.

The amended rules clarify that IBUs are not subject to a separate capital requirement. Instead, conventional banks with IBUs will follow the capital requirements that apply to their bank category. 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, starting 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 No. 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. Bangko Sentral ng Pilipinas