presentation legal

8/12/2019 Presentation Legal

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THE CONTRIBUTION OF CENTRAL

BANK ACT 2009 AND ISLAMIC

FINANCIAL SERVICE ACT 2013 TO

ISLAMIC FINANCE INDUSTRY IN

MALAYSIA

Presented by :

Nur Shafila Binti Zakaria

Nor Ashila Binti Azizan


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Central Bank Act 2009:-

Enforce on 25 November 2009, replaced the old Central Bank of

Malaysia Act 1958.

An Act to provide for the continued existence of the Central Bank of

Malaysia and for the administration, objects, functions and powers of

the Bank, for consequential or incidental matters.

Enables Bank Negara Malaysia (BNM) to deal more effectively with

emerging risks and challenges in discharging its roles and

responsibilities as the nation's central bank.

Provides greater clarity on BNMsmandates and vests BNM as well

as powerful governance framework.


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Contribution:-

1. Promote Financial Stability Promotion of a volatile and progressive financial industry

launched the Financial Sector Blueprint (FSBP) on 21 December

2011.

FSBP : focused on achieving strategic outcomes in the ninecritical arease.g : internationalization of Islamic finance

2. Promote Monetary Stability Maintaining the price stability (OPR= 3.00%) - prevent the build-

up of financial imbalances & protection against risks of inflation.

BNM had introduced two new Islamic monetary instruments:

*Bank Negara Monetary Notes-Istithmar (BNMN-Istithmar)

*Bank Negara Monetary Notes-Bai Bithaman Ajil (BNMN-

BBA).


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Contribution:-

3. Provide protection against money launderingand terrorism financing offences. BNM administers and enforces Anti-Money Laundering and Anti-

Terrorism Financing Act 2001 (AMLATFA).

BNM has established the Financial Intelligence Unit to performthese functions and exercise its powers under the AMLATFA.

4. Promotion of Malaysia as an International

Islamic Financial Centre Launched Malaysia International Islamic Financial Centre (MIFC)

initiative- accelerating the process of bridging and strengthening therelationship between the international Islamic financial markets and t

expand investment and trade relations between the Middle Eastern,

West Asia and North Africa regions with East Asia.


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Contribution:-

5. Promote international cooperation Bank Negara and the Hong Kong Monetary Authority have worked in

close partnership - collaboration in issuing sukuk at Hong Kong


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2013


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OVERVIEW

WHAT IS IFSA

NEW REGULATION/KEY CHANGES

CONTRIBUTION


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IFSA 2013

Effects on 31 June 2013,approved by parliament

Repeal of BAFIA 1983(Banking And Financial

Institution Act) andTAKAFUL ACT 1984

Takaful services+islamicfinance=similar fashion

maintain financial stability,support inclusive growth in

the financial system and theeconomy, provide adequateprotection for consumers.


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NEW REGULATION/KEY

CHANGES1. GREATER CLARITY AND

TRANSPARENCY IN THEIMPLEMENTATION ANDADMINISTRATION OF THE LAW

Clear BNM regulatory & accountability

transparent triggers for the exercise of BNMpowers and functions under the law

transparent assessment criteria forauthorizing institutions to carry on regulatedfinancial business

shareholder suitability


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NEW REGULATION/KEY

CHANGES

2.A CLEAR FOCUS ON SHARIAHCOMPLIANCE AND GOVERNANCE

IN THE ISLAMIC FINANCIAL

SECTORComprehensive legal framework of all

aspect

Licensing to winding up institution


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NEW REGULATION/KEY

CHANGES

3. PROVISION

For differentiated regulatory

requirements that reflect the nature of

financial intermediation activities andtheir risks to the overall financial

system

to regulate financial holdingcompanies and non-regulated entities:

take account systematic risk, financial

intermediation


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NEW REGULATION/KEY

CHANGES

4. STRENGHTHENED

business conduct and consumer

protection requirements to promote

consumer confidence in the use offinancial services and products;

provisions for effective and early

enforcement and supervisoryintervention


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contribution

Islamicfinanceindustry

Deposittransition

StrongLegalFoundation

Takafulindustry

Takaful andretakaful


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Transition of Deposits from the Repealed Islamic Banking Act,

1983 (IBA)to the Islamic Financial Services Act 2013 (IFSA)

IFSA 2013 : distinction between Islamic deposit andIslamic investment product classification

Why is there a need to reclassify the Islamicdeposits?

How are the deposits being classified? What is the impact to consumers?

When will this take effect and how long is thetransition period?

Would my deposit be protected by PerbadananInsurans Am Malaysia (PIDM)?

Will the returns and benefits remain after theconversion?

Will the principal be guaranteed after the conversion?


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Transition of Deposits from the Repealed Islamic

Banking Act, 1983 (IBA) to the Islamic Financial

Services Act 2013 (IFSA)

KFH NOTICE

EXISTING ACCOUNT OF ISLAMIC

DEPOSIT UNDER CASA AND TERM

DEPOSIT CLASSIFIED AS INVESTMNETPRODUCTS

Existing account of GIA-i, FC-GIA under

mudharabah converted to KFH International

Commodity Murabahah deposit-i (ICM) andKFH Foreign Currency International

Commodity Murabahah deposit-i (FC-ICM)

No cost and hassle free


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STRONG LEGAL FOUNDATIONTHREE ELEMENTS OF THE NEW LEGISLATION:

1. clearly scope of assets and liabilities inIslamic banking business based on theunderlying contractual features.

2. liability side, principal-guaranteed Shariah

contracts:qard, wadiahand tawarruq in deposit-taking

3. Asset side: non-guaranteed Shariahcontracts:

mudarabah and wakalahin investment

include equity and partnership financingcontracts: musharakah mutanaqisah, lease-based financing contracts such as ijarahmuntahia bittamleek, and fee-based activities

underwakalah contracts.


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TAKAFUL AND RETAKAFUL

Establishment As PublicCompany

Shariah

Governance

NewPrudential

Requirement

Single License

TakafulBussiness

SINGLE LICENSE TAKAFUL


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SINGLE LICENSE TAKAFUL

BUSSINESS

Separate Familily Business andGeneral Business, given 5 year period

Expand on General takaful that lagging

behind Giving up general license-new players

enter the markets

ESTABLISHMENT AS PUBLIC


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ESTABLISHMENT AS PUBLIC

COMPANY

Nature of mutual assistance in takaful-appropriate as cooperative or mutual

Public company as wholly commercial

venture It is better if takaful companies given

an option-cooperative or mutual


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SHARIAH GOVERNANCE

Shariah compliance effort increasecost

Takaful and retakaful firm should be

able higher price than conventional In reality, it is often not possible, make

the firm difficult same return as

conventional

NEW PRUDENTIAL


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NEW PRUDENTIAL

REQUIREMENT

New prudential requirement on takafuloperators: maintain various funds,

asset and risk management among

others Qard compulsory in case of deficit of

risk fund as it effects reserve

requirement Takaful=participants mutual assistance,

qard make takaful as transfer

mechanism


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- THE END -

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