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
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 BNMs mandates and vests BNM as well
as powerful governance framework.
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 nine
critical areas e.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).

Contribution:-
3. Provide protection against money laundering
and 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 perform
these 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 the
relationship 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.
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


2013
OVERVIEW
WHAT IS IFSA
NEW REGULATION/KEY CHANGES
CONTRIBUTION
IFSA 2013
Effects on 31 June 2013,
approved by parliament
Repeal of BAFIA 1983
(Banking And Financial
Institution Act) and
TAKAFUL ACT 1984
Takaful services+islamic
finance=similar fashion
maintain financial stability,
support inclusive growth in
the financial system and the
economy, provide adequate
protection for consumers.
NEW REGULATION/KEY
CHANGES
1. GREATER CLARITY AND
TRANSPARENCY IN THE
IMPLEMENTATION AND
ADMINISTRATION OF THE LAW
Clear BNM regulatory & accountability
transparent triggers for the exercise of BNM
powers and functions under the law
transparent assessment criteria for
authorizing institutions to carry on regulated
financial business
shareholder suitability


NEW REGULATION/KEY
CHANGES
2.A CLEAR FOCUS ON SHARIAH
COMPLIANCE AND GOVERNANCE
IN THE ISLAMIC FINANCIAL
SECTOR
Comprehensive legal framework of all
aspect
Licensing to winding up institution
NEW REGULATION/KEY
CHANGES
3. PROVISION
For differentiated regulatory
requirements that reflect the nature of
financial intermediation activities and
their risks to the overall financial
system
to regulate financial holding
companies and non-regulated entities:
take account systematic risk, financial
intermediation
NEW REGULATION/KEY
CHANGES
4. STRENGHTHENED
business conduct and consumer
protection requirements to promote
consumer confidence in the use of
financial services and products;
provisions for effective and early
enforcement and supervisory
intervention




contribution
Islamic
finance
industry
Deposit
transition
Strong
Legal
Foundation
Takaful
industry
Takaful and
retakaful
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 and
Islamic investment product classification
Why is there a need to reclassify the Islamic
deposits?
How are the deposits being classified?
What is the impact to consumers?
When will this take effect and how long is the
transition period?
Would my deposit be protected by Perbadanan
Insurans Am Malaysia (PIDM)?
Will the returns and benefits remain after the
conversion?
Will the principal be guaranteed after the conversion?

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 INVESTMNET
PRODUCTS
Existing account of GIA-i, FC-GIA under
mudharabah converted to KFH International
Commodity Murabahah deposit-i (ICM) and
KFH Foreign Currency International
Commodity Murabahah deposit-i (FC-ICM)
No cost and hassle free

STRONG LEGAL FOUNDATION
THREE ELEMENTS OF THE NEW LEGISLATION:
1. clearly scope of assets and liabilities in
Islamic banking business based on the
underlying contractual features.
2. liability side, principal-guaranteed Shariah
contracts:
qard, wadiah and tawarruq in deposit-taking
3. Asset side: non-guaranteed Shariah
contracts:
mudarabah and wakalah in investment
include equity and partnership financing
contracts: musharakah mutanaqisah, lease-
based financing contracts such as ijarah
muntahia bittamleek, and fee-based activities
underwakalah contracts.

TAKAFUL AND RETAKAFUL
Establishmen
t As Public
Company
Shariah
Governance
New
Prudential
Requirement
Single License
Takaful
Bussiness
SINGLE LICENSE TAKAFUL
BUSSINESS
Separate Familily Business and
General Business, given 5 year period
Expand on General takaful that lagging
behind
Giving up general license-new players
enter the markets

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
SHARIAH GOVERNANCE

Shariah compliance effort increase
cost
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
REQUIREMENT

New prudential requirement on takaful
operators: 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
- THE END -