Manila: Rules governing the operation of Islamic Banking Units (IBUs) have been amended to encourage more players and help boost the country’s Islamic banking sector. The Bangko Sentral ng Pilipinas (BSP) clarified that IBUs need not have a separate capital requirement since these are just a division or department of a conventional bank, even if it follows the principles of Shari’ah banking, which prohibit the imposition of interest on borrowings.

According to Philippines News Agency, the BSP stated in a press release that the processing fee for an IBU license will follow the fees corresponding to the bank’s category. The new rules also institutionalize a three-year observation period, starting from the launch of Islamic banking operations, for submitting prudential reports on Islamic banking operations. Furthermore, these units are no longer required to submit a separate liquidity report in addition to the ones submitted by the mother bank.

The BSP emphasized that this initiative gives industry players time to become familiar with the reportorial requirements. BSP Governor Eli Remolona noted that these changes aim to encourage more players to enter and help develop the Philippine Islamic finance market. Remolona highlighted that this supports the goals of inclusive growth and a more diverse financial sector.