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Overview of Islamic Financial Regulatory Paradigm in Malaysia Prof. Dr. Mohd. Ma’sum Billah

Overview of Islamic Financial Regulatory Paradigm in Malaysia Prof. Dr. Mohd. Ma’sum Billah www.drmasumbillah.blogspot.com Bank Negara Malaysia. Issues to be Highlighted. PREVIEW ISSUES REQUIRED TO BE ADDRESSED:

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Overview of Islamic Financial Regulatory Paradigm in Malaysia Prof. Dr. Mohd. Ma’sum Billah

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  1. Overview of Islamic Financial Regulatory Paradigm in Malaysia Prof. Dr. Mohd. Ma’sum Billah www.drmasumbillah.blogspot.com Bank Negara Malaysia

  2. Issues to be Highlighted • PREVIEW • ISSUES REQUIRED TO BE ADDRESSED: • Recent Development of Islamic Regulatory Frameworks: On Banking, Finance, Takaful, Financial Planning, Capital Market, Wealth & Property Management, Business, Commerce, E-Commerce, and IT. • Effects of the Absence of the Regulatory Frameworks. • The Way Forward: Possible Recommendations

  3. Recent Development of Islamic Regulatory Frameworks Globally • Global Islamic Economic Environment: • Middle East • Other Muslim World • Non-Muslim World

  4. Recent Development of Islamic Regulatory Frameworks in Malaysia • BANKING: Islamic Banking Act 1983 (Amendment 2003), section 13A (1) “Advice of Syariah Advisory Council”, (Islamic Bank may seek advice from the SAC and is binding to apply). • BAFIA: Amendment 2003, section 124 (7)(a) Syariah Advisory Council means, the SAC established under the Central Bank of Malaysia Act 1958.

  5. Cont. • BANK NEGARA MALAYSIA ACT 1958 (Amendment 2003), • section 16 (B)(1) The SAC shall have the authority to ascertain the total Syariah compliance of all matters relating to Islamic banking and finance. • Section 16 (B)(2) Appointment of the SAC subject to their qualification with their appropriate knowledge on Syariah, banking, finance, law and other related disciplines.

  6. Cont. • Section 16 (B)(3): Judges may also be appointed in the SAC. • Section 16 (B)(4): SAC’s Functions. • Section 16 (B)(5): SAC’s Remuneration. • Section 16 (B)(6): SAC Limitation to be a member in more than one institution. • Section 16 (B)(7): The BNM has the right to consult the SAC.

  7. Cont. • Section 16 (B)(8): SAC opinion is admissible in any legal proceedings. • Section 16 (B)(9): SAC’s ruling is binding on the legal proceedings. • Section 16 (B)(10): Establishment of secretariat for the SAC. • Section 16 (B)(11): Request for consultation from the SAC shall be through the secretariat. • Section 16 (B)(12): Interpretations.

  8. Cont.... • ARBITRATION: • Section 16 B (8) of the Bank Negara Malaysia Act 1958 (Amendment 2003) provides that: “Where any proceedings relating to Islamic Banking business, Takaful, Islamic finance or any other business based on Shari’ah and is supervised and regulated by the Bank before any court or ARBITRATOR any question arises concerning a Shari’ah matter, the court or the ARBITRATOR, as the case may be, may: • Take into consideration any written directives issued by the Bank ........or • Refer such question to the SAC for its Rulings.

  9. Cont. • TAKAFUL ACT 1984 (Amendment 2003), • section 53A (1) “Advice of Syariah Advisory Council to Takaful operator, agent, broker, or adjuster. • ISLAMIC CAPITAL MARKET: Resolutions of the Securities Commission Syariah Advisory Council 2002 • SAC of the SC • Research methodologies in the ICM • Principles of Al-Mu’amalat in the ICM

  10. Cont. • Capital Market Products According to Islamic JurisprudenceCapital Market issues According to Islamic Jurisprudence • Syariah Criteria for Listed Securities • Islamic Financial Services Board Act 2002 • TABUNG HAJI ACT 1995 • Establishment, officers and agents, finance, pilgrim organizer, pilgrims and miscellaneous.

  11. Cont. • AAOIFI: • Financial Accounting Number 13 • Financial Accounting Number 14 • Auditing Standard for Islamic Financial Institution Number 4 • Statement of Financial Accounting • Financial Accounting Standards • Code of Ethics for Accountants and Auditors of Islamic Financial Institutions

  12. Effects of the Absence of the Regulatory Frameworks. • Inefficiency. • Unhealthy Competition. • No Confidence. • Hampering the Progress.

  13. The Way Forward: Possible Recommendations • Possible Efforts to Establish the Necessary Regulatory Framework • The following are needed to meet the contemporary demand: • Future (Upgrading) Of --- • Islamic Banking Act 1983 • Takăful Act 1984 • BAFIA (amendment) 1996 (S.66)

  14. Cont. • Possibilities & Prospects (Bills)Of--- • Islamic Negotiable / Monetary Instruments Bill • Islamic Companies Bill • Islamic Leasing (الاجارة) Bill • Islamic Unit Trust Bill • Islamic Pawnshop (الرهن(Bill • Islamic BAFIA

  15. Cont. • Islamic Contract (العقد) Bill • Islamic Revenue (الزكواة والعشر(Bill • Islamic Bond @ Sukuk Bill • Islamic Wealth Management Bill • Islamic Financial Planning Bill • Islamic Hire-Purchase Bill • Islamic Sale of Goods Bill • Islamic Money Laundering Bill

  16. Cont. • Possibilities & Prospects (Standards) Of--- • Islamic Accounting Standard (MASB) • Islamic Auditing Standard • Islamic Partnership (المشاركة) Standard • Islamic Commercial Arbitration ((التحكيمStandard

  17. Thank YouWa’ssalam

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