Islamic banking laws being finalised

The new legal framework for Islamic banking and takaful is now at the final stages of the enactment process, Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said today.

She said the new law is aimed at promoting certainty to the legal and regulatory treatment of Islamic financial transactions by providing legal recognition to the contractual requirements in accordance with the Syariah.

"This provides a comprehensive legal environment under which effective risk and profit sharing activities can take place, encompassing all aspects of Islamic financial transactions," she said at the Islamic Development Bank Regional Lecture Series on Islamic Economics, Finance and Banking in Jakarta.

The text of her speech entitled, 'Finance and the Real Economy Fostering Sustainability' was made available to Bernama here.

The new law would cover all aspects from Islamic prudential and business conduct requirements to the legal treatment of Islamic banking assets upon its resolution.

Zeti also said that the role of macro-prudential policy and the developments in Islamic finance have gained greater prominence in terms of their potential to improve financial stability outcomes.

It has also contributed towards restoring the foundations for finance that supports sustainable economic growth and bringing immense benefits to the real economy as well as to the well-being of society.

"There can be no substitute for the effective ongoing supervision of financial institutions, which relies on supervisory assessments and judgments.

"Efforts should therefore also be accorded towards further strengthening the conduct of micro-prudential supervision and promoting the complementarities between micro- and macro-prudential policies," she said.

Meanwhile, Zeti said Islamic finance had all the ingredients and the potential to meet the needs of the global economy.

"The channelling of funds to productive activities in Islamic finance today is still largely being carried out through non-participatory contracts, that includes the mark-up sale (murabahah) and the lease-based (ijarah) structures, which continue to remain essential to cater for financing trade and the purchase of assets," she said.