MLY CB issued Islamic banking window - exposure draft (of Jan. 31), which outlines proposed enhancements to Guidelines on skim perbankan Islam (of Nov. 2, 2012).
Guidelines on skim perbankan Islam are also known as Guidelines on Islamic banking scheme; in addition, this MLY CB proposal outlines authorization, prudential and operational regulatory requirements applicable to Islamic banking window (IBW).
In addition, MLY CB also invited feedback on the proposed regulatory requirements.
This proposal applies to licensed banks; licensed investment banks; prescribed development financial institutions; the enhancements seek to ensure the below.
Namely, that requirements cover all IBW players, i.e. prescribed institutions under Development financial institutions act (DFIA), overseas branches of licensed persons.
MLY CB explained that these proposals have taken into consideration practicality and relevancy of the requirements of the IBW to both domestic as well as overseas business which may experience different operating and regulatory environment.
Further Detail
New policy document will supersede guidelines above; specifies scope of Islamic banking/financial business that can be carried out by licensed person under Financial services act or prescribed institution which has been approved under the DFIA.
Also specifies submission and operational requirements to facilitate approvals under Financial services act or DFIA for an IBW institution to carry on its IBW operations.
Relevant requirements to be complied with by an IBW institution to ensure the IBW operations are in compliance with Shariah requirements at all times.
Specific requirements that must be complied with re the IBW operations conducted by overseas branches of a licensed person or a prescribed institution.
Consultation End
The comment period for this consultation closes on Mar. 31, 2024.
Nov. 2024 Policy Document Finalized
On Nov. 11, 2024, MLY CB issued Islamic banking window policy document, and FAQs.
FAQ states major adverse findings refers to significant non-compliance/breaches that could impact FI's governance/Shariah compliance, potentially risking financial stability.
The IBW policy document allows flexibility in leadership appointments, based on qualifications, skills, and experience, without requiring specific religious identity.
IBWs must adhere to Shariah standards; for challenges in foreign jurisdictions, robust deliberations by Shariah committees are required, consultation with the MLY CB.
Offshore IBW operations in Labuan, Malaysia, are classified as overseas branches.
The policy is effective from Jan. 1, 2025.
Document dated Nov. 11, 2024, received from MLY CB Nov. 14, summarized Nov. 18.
