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REGULATORY FRAMEWORK FOR ISLAMIC BANKING & FINANCE IN MALAYSIA,…
REGULATORY FRAMEWORK FOR ISLAMIC BANKING & FINANCE IN MALAYSIA
a) RATIONALE FOR REGULATION
(a)(i) Salient features of Islamic Finance
SHARI'AH COMPLIANCE
Riba-free : does not create money
Gharar-free : uncertainties are to be avoided
Haram-free : no trading in prohibited commodities
CUSTOMER-FINANCIER RELATIONSHIP
Main legal relationship is no longer lender-borrower
Trading, leasing and partnership relationship
Ex : murabahah, tawarruq, wa'd, ijarah, mudharabah
SHARI'AH COMPLIANT ASSET
Underlying asset vis-a-vis asset as security
PROFIT GAIN
Profit & loss sharing : no premium imposed on principal loan
SHARI'AH OVERSIGHT
SAC, Shari'ah committee
(a)(ii)Shari'ah values are in line with universal values
Real activities
Ethical
Governance
Partnership
b) OVERVIEW OF THE MALAYSIAN LEGAL SYSTEM
TWO MAIN REGULATORS
BANK NEGARA MALAYSIA (BNM) : Islamic banking, certain DFIs, takaful & Islamic money markets
SECURITIES COMMISSION (SC) : Islamic capital markets products and services providers
NOT REGULATED BY BNM OR SC
eg - Islamic pawnbroking companies, Islamic leasing companies, Islamic factoring companies, Islamic hire-purchase companies & Islamic credit companies
ISLAMIC FINANCE LANDSCAPE
Islamic banking
Takaful
Islamic money markets
Islamic capital markets
Islamic capital markets services
Islamic financial services
UNIQUE CHARACTERISTICS OF ISLAMIC FINANCIAL INSTITUTIONS
Deposits taken on PLS/Qard agreements
Deposits - capital Non-guaranteed liability
IB involves trading/real economics activities
DOMINO EFFECT ON REGULATION & SUPERVISION
Risk Exposure
Corporate governance (Risk Management)
Deposit Insurance
Capital adequacy requirement
(a)(iii) Why need regulation?
Monetary policy
Shari'ah Compliance
Safety & Stability
Corporate Governance
Competition & Efficiency
c) LEGAL FRAMEWORK FOR COMMERCIAL MATTERS
Governing Infrastructure
Shari'ah Governance
Regulatory
Legal
Appreciate the uniqueness
Recognise unique structure of Islamic finance
Acknowledge distinctive risks associate with Islamic finance
Acknowledge the challenge
Identify pre-requisites for sustainable system, eg : human capital, infrastructure, capacity & capability
Balancing the need for prudential regulation & strategic aspiration
Understand the fundamental
Shari'ah as the backbone of Islamic finance
Specific approach must be taken to ensure adherence to Shari'ah principles
Recognise the environment
Understand local industry
Customise regulatory & supervisory approach to nature of Islamic financial transactions
Resolve pressing & emerging system-wide issues
HALIMAH BINTI ADNAN
INSTRUCTOR : MDM NURDIANAWATI IRWANI ABDULLAH
LEGAL ASPECTS OF IBF (SECTION 1)
SUBMISSION DATE : 5 June 2020
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