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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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