IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 6848 (THE ISLAMIC BANK CHARTER)
(Appendix to Sec. 101)
Sec. 1. Domicile and Place of Business
Sec. 2. Purpose and Basis
Sec. 3. Shari’a Advisory Council
Sec. 4. Functions of the Shari’a Advisory Council
Sec. 5. Islamic Bank’s Powers
1. To prescribe its by-laws and its operating policies;
2. To adopt, alter and use a corporate seal;
3. To make contracts, to sue and be sued;
4. To borrow money; to own real or personal property and to introduce improvements thereon, and to sell mortgage or otherwise dispose of the same;
5. To employ such officers and personnel, preferably from the qualified Muslim sector, as may be necessary to carry Islamic banking business;
6. To establish branches, agencies and correspondent offices in provinces and cities in the Philippines, particularly where Muslims are predominantly located, or in other areas in the country or abroad as may be necessary to carry on its Islamic banking business, subject to the rules and regulations of the Bangko Sentral;
7. To perform the following banking services:
a. Open current or checking accounts;
b. Open savings accounts for safekeeping or custody with no participation in profit and losses unless otherwise authorized by the account holders to be invested;
c. Accept investment account placements and invest the same for a term with the IB’s funds in Islamically permissible transactions on participation basis;
d. Accept foreign currency deposits from banks, companies, organizations and individuals, including foreign governments;
e. Buy and sell foreign exchange;
f. Act as correspondent of banks and institutions to handle remittances or any fund transfers;
g. Accept drafts and issue letters of credit or letters of guarantee, negotiable notes and bills of exchange and other evidence of indebtedness under the universally accepted Islamic financial instruments;
h. Act as collection agent insofar as the payment orders, bills of exchange or other commercial documents are exclusive of riba or interest prohibitions;
i. Provide financing with or without collateral by way of Al-Ijarah (leasing), Al-Bai ul Takjiri (sale and leaseback), or Al-Murabahah (cost- plus profit sales arrangement);
j. Handle storage operations for goods or commodity financing secured by warehouse receipts presented to the Bank;
k. Issue shares for the account of institutions and companies assisted by the Bank in meeting subscription calls or augmenting their capital and/or fund requirements as may be allowed by law;
l. Undertake various investments in all transactions allowed by the Islamic Shari’a in such a way that shall not permit the haram (forbidden), nor forbid the halal (permissible);
8. To act as an official depository of the government or its branches, subdivisions and instrumentalities and of government-owned or controlled corporations, particularly those doing business in the Autonomous Region;
9. To issue investment participation certificates, muquaradah (non-interest- bearing bonds), debentures, collaterals and/or the renewal or refinancing of the same, with the approval of the Monetary Board of the Bangko Sentral, to be used by the Bank in its financing operations for projects that will promote the economic development primarily of the Autonomous Region;
10. To carry out financing and joint investment operations by way of mudarabah partnership, musharaka joint venture or by decreasing participation, murabaha purchasing for others on a cost-plus financing arrangement, and to invest funds directly in various projects or through the use of funds whose owners desire to invest jointly with other resources available to the IB on a joint mudarabah basis;
11. To invest in the equity of allied undertakings, financial or non-financial, as well as in the equity of enterprises engaged in non-allied activities, as the Monetary Board has declared or may declare as appropriate from time to time, subject to the limitations and conditions provided for under the Manual of Regulations for Banks and Other Financial Intermediaries – Book I (MRBOFI) ; and
12. To exercise the powers granted under R.A. No. 6848 and such incidental powers as may be necessary to carry on its business, and to exercise further the general powers mentioned in the Corporation Law and the General Banking Act, insofar as they are not inconsistent or incompatible with the provisions of R.A. No. 6848.
Sec. 6. Authorized Capital Stock
Sec. 7. Classification of Shares
1. Series “A” shares shall comprise 5.1 million shares equivalent to P510.0 million to be made available for subscription by the present stockholders of the Philippine Amanah Bank namely: the National Government, and such other financial entities as it may designate.
2. Series “B” shares shall comprise nine hundred thousand (900,000) shares equivalent to P90.0 million to be made available for subscription by the Filipino individuals and institutions.
3. Series “C” shares shall comprise 4.0 million shares equivalent to P400.0 million to be made available for subscription by Filipino and foreign individuals and/or institutions or entities.
Sec. 8. Sale or Transfer of Shares
1. Any proposal for the sale or disposal of its share or business, or other matters related thereto, which will result in a change of the control of management of the IB in the following cases:
a. Any sale or transfer of ownership or control of more than twenty percent (20%) of the voting stock of the Bank to any person whether natural or juridical; and
b. Any sale or transfer or a series of sales or transfers which will effect a change in the majority ownership or control of the voting stock of the Bank from one group of persons to another group.
2. Any scheme for reconstruction or for consolidation or merger, or otherwise, between the IB and any other company wherein the whole or any part of the undertaking of the property of the IB is to be transferred to another corporation.
3. Acquisition by foreign banking institutions, including their wholly- or majority-owned subsidiaries and their holding companies having majority holdings in such foreign banking institutions.
Sec. 9. Privatization
Sec. 10. Board of Arbitration
Sec. 11. Incentives to Islamic Banking
Sec. 12. Grants and Donations
Sec. 13. Non-Interest Bearing Placements
1. Savings accounts
2. Investment participation accounts
3. Current accounts and other deposit liabilities.
Sec. 14. Investment of Funds
Sec. 15. Return on Investment Funds
Sec. 16. Allocation of Resources
Sec. 17. Authorized Banking Services
Sec. 18. Acceptance of Government Funds
Sec. 19. Authorized Commercial Operations
1. The IB may have a direct interest as a shareholder, partner, owner or any other capacity in any commercial, industrial, agricultural, real estate or development project under mudarabah form of partnership or musharaka joint venture agreement or by decreasing participation, or otherwise invest under any of the various contemporary Islamic financing techniques or modes of investment for profit sharing.
2. The IB may carry on commercial operations for the purpose of realizing its investment banking objectives by establishing enterprises or financing existing enterprises, or otherwise by participating in any way with other companies, institutions or banks performing activities similar to its own or which may help accomplish its objectives in the Philippines or abroad, under any of the contemporary Islamic financing techniques or modes of investment for profit sharing; and
3. The IB may perform all business ventures and transactions as may be necessary to carry out the objectives of its charter within the framework of the IB’s financial capabilities and technical considerations prescribed by law and convention: Provided, That these shall not involve any riba or other activities prohibited by the Islamic Shari’a principles.
Sec. 20. Employee Share Schemes
1. Any arrangement under which the directors, officers and employees of the IB receive, in addition to their salaries and wages, a share, fixed beforehand, in the profits realized by the Bank or by its affiliate companies to which the profit sharing scheme relates; and
2. Any arrangement under which the IB facilitates the acquisition by its directors, officers and employees of common shares of stock either as share- incentives, share-bonus options, or any other share-saving schemes as the board of directors may determine.
Sec. 21. Investment Ceilings; Business Limits
1. The aggregate credit facilities or any other liabilities of any customer of the IB shall not exceed at all times fifteen percent (15%) of the unimpaired capital and surplus of the Bank.
a. Interbank Receivable
b. Financing and Investment
c. Trade Financing
d. Agrarian Reform/Other Agricultural Financing – P. D. No. 717
e. Bills Purchased
f. Customer’s Liability on Bills/Drafts under Letters of Credit and/or Trust Receipts
g. Customer’s Liability for this Bank’s Acceptances Outstanding
h. Trading Account Securities –Financing
i. Underwriting Accounts – Debt Securities
j. Stand-by Letters of Credit
k. Such other facilities as may be determined by the Monetary Board Credit facilities granted by the IB to any other bank, as well as deposits maintained by it in any bank, shall be subject to the credit facility limit to any single borrower as herein prescribed.
2. The aggregate amount of investment portfolios for any single industry (following the major industry groupings in the 1977 Philippine Standard Industrial Classification) shall at no time exceed thirty percent (30%) of the IB’s investment capacity. Investment capacity shall mean the total unimpaired capital and surplus plus deposits and borrowings minus the investment in bank premises.
3. The IB shall not grant unsecured loans except gardhasan (benevolent loans). Such outstanding unsecured loans or credit accommodations which the IB may extend at any time without security or in respect of any advance, loan or credit facility made with the security wholly or partly whenever at any time it exceeds the aggregate market value of the assets constituting the security, shall be limited to fifty thousand pesos (P50,000.00) to any person, company, corporation or firm.
4. A credit facility granted to any person for the purpose of financing the acquisition of shares in any company, corporation or firm shall not exceed fifty percent (50%) of the appraised value of the shares at the time the credit facility is granted. Appraised value, in the case of listed shares, shall mean the weighted average price in the stock exchange. For unlisted shares, the appraised value shall mean the book value of the shares.
Sec. 22. Loans and Credit Facilities to Directors, Officers, Employees and Stockholders
1. General Policy. Except as otherwise provided in these regulations, the IB shall not directly or indirectly grant an advance, loan or credit facility to any of its directors, officers, employees or stockholders, or to any other person for whom any of them is a guarantor, or in any manner be an obligor for money granted by the IB.
2. Direct Loans to Officers, Employees and Stockholders. Whenever the IB is satisfied that special circumstances exist, a loan not exceeding at any one time an amount equivalent to six months remuneration, may be granted to an officer and employees in the form of fringe benefits granted in accordance with the rules and regulations prescribed under Section 1337 of the MRBOFI shall not be subject to the preceding limitation, nor to the ceiling on unsecured loans prescribed in Section 21.
3. Indirect Credit Facilities to Directors and Auditors. No credit facility shall be granted by the IB to a company, corporation, partnership or firm wherein any member of the board of directors or auditors is a shareholder, partner, manager, agent or employee in any manner, except with the written approval of and by unanimous vote of not less than two-thirds of all the members of the board of directors, excluding the director concerned: Provided, That the total liabilities of such company, corporation, partnership or firm to the IB shall be limited to the director’s or auditor’s outstanding deposits or the book value of his paid-in capital in the Bank, whichever is higher.
4. Aggregate Ceiling. Except with the prior approval of the Monetary Board, the total outstanding credit facilities of directors, officers, auditors and stockholders, whether direct or indirect, shall not exceed fifteen percent (15%) of the total credit facilities of the Bank or one hundred percent (100%) of combined capital accounts, net of deferred income tax and such unbooked valuation reserves and other capital adjustments as may be required by the Bangko Sentral, whichever is lower.
5. Procedural Requirements. The following provisions shall apply to direct loans to officers and indirect credit facilities to directors and auditors, allowed under these regulations.
a. Approval of the Board; when to obtain. Direct loans to officers shall require the prior written approval of the majority of the directors.
b. Approval by the board; how manifested. The approval as required in Item “a” above shall be manifested in a resolution passed by the board of directors duly assembled during a regular or special meeting for that purpose and made of record.
c. Determination of compliance with the required number of votes. The determination of the majority or two-thirds (2/3) of the directors, excluding the directors concerned, shall be based on the total number of directors of the Bank as provided in its Charter and By-Laws.
d. Content of the resolution. The resolution of the board of directors shall contain the following information:
(i) Name of the director, officer or auditor concerned and his relationship as regards the credit facility, such as principal, indorser, guarantor, etc.;
(ii) Nature of the loan or credit facility, purpose, amount, credit basis for such loan or credit facility, security and appraisal thereof, maturity, schedule of repayment, and other terms of the loan or credit facility;
(iii) Date of the resolution;
(iv) Names of the directors who were present and who participated in the deliberations of the meeting;
(v) Names in print and signatures of the directors approving the resolution: Provided, That the corporate secretary may sign, under a power-of-attorney, in behalf of a director who was present in the board meeting and who approved such resolution, in instances where such signature is necessary to indicate that such resolution was approved by a majority or two-thirds of the directors; and
(vi) Such other information as may be required by the appropriate supervising and examining department of the Bangko Sentral.
e. Transmittal of copy of board approval; contents thereof. A copy of the written approval of the board of directors, as herein required, shall be submitted to the appropriate supervising and examining department of the Bangko Sentral within twenty (20) banking days from the date of approval. The copy may be a duplicate of the original, or a reproduction copy showing clearly the signatures of the approving directors: Provided, That if a reproduction copy is to be submitted, it shall contain on its face or reverse side a signed certification by the Secretary that it is a reproduction of the original written approval.
Sec. 23. Past Due Accounts
1. Loans or receivables payable on demand – if not paid on the date indicated on the demand letter, or within six (6) months from date of grant, whichever comes earlier;
2. Financing and investment accounts not paid at maturity/ expiry date or not paid in accordance with the terms of payment stipulated in the agreement/ contract;
3. Customers’ liability on drafts under LC/TR
a. Sight Bills – if dishonored upon presentment for payment or not paid within thirty (30) days from date of original entry, whichever comes earlier;
b. Usance Bills – if dishonored upon presentment for acceptance or not paid on due date, whichever comes earlier; and
c. Trust Receipts – if not paid on due date;
4. Bills and other negotiable instruments purchased – if dishonored upon presentment for acceptance/ payment or not paid on maturity date, whichever comes earlier: Provided, however, That an out-of-town check and a foreign check shall be considered as past due if outstanding for thirty (30) days and forty-five (45) days respectively, unless earlier dishonored;
5. Credit facilities or receivables payable in installments – the total outstanding balance thereof shall be considered past due in accordance with the following schedule:
|Mode of Payment||of Installments in Arrears|
6. Credit card receivables – if the amount due is not paid within ten (10) days from the deadline indicated in the billing statement; and
7. All items in litigation as defined in the IB’s Manual of Accounts.
Sec. 24. Equity Investments
1. Financial Allied Undertakings. With prior approval of the Monetary Board, the IB may invest in the equity of the following financial allied undertakings:
a. Leasing companies;
c. Investment houses;
d. Financing companies;
e. Credit card operations;
f. Financial institutions addressed/ catering to small and medium- scale industries;
g. Companies engaged in stock brokerage/security dealership/ brokerage;
h. Foreign exchange dealers/brokers; and
i. Insurance companies.
|KBs||– Up to 49%|
|TBs and RBs||– Up to 100%|
|Other financial allied undertakings||– Up to 100% without prejudice to the limitations prescribed in Subsec. 1378.1 (of the MRBOFI).|
2. Non-Financial Allied Undertakings. The IB may invest in the equity of the following non-financial allied undertakings:
a. Warehousing companies;
b. Storage companies;
c. Safe deposit box companies;
d. Companies engaged in the management of mutual funds but not in the mutual funds themselves;
e. Management corporations engaged or to be engaged in activity similar to the management of mutual funds;
f. Companies engaged in the provision of computer services;
g. Insurance agencies: Provided, That no director, officer or stockholder of the bank and their related interests hold/ own more than twenty percent (20%) of the subscribed capital stock or equity of the insurance company for which the affiliates insurance acts as agent;
h. Companies engaged in home building and home development;
i. Companies providing drying and/or milling facilities for agricultural crops such as rice and corn;
j. Companies engaged in insurance brokerage: Provided, That no director, officer, stockholder of the IB or its related interests shall have financial interests in the insurance company/companies for which the affiliate insurance brokerage company acts as broker;
k. Bank service corporations all of the capital of which is owned by one or more banks and organized to perform for and in behalf of banks the following services:
(i) data processing systems development and maintenance;
(ii) deposit and withdrawal recording;
(iii) computation and recording of interests, service charges, penalties and other fees;
(iv) check-clearing processing, such as the transmission and receipt of check-clearing items/tapes to and from the Bangko Sentral, collection and delivery of checks not included in the Philippine Clearing House System, as well as the recording of the same; and
(v) printing and delivery of bank statements.
l. Clearing house companies such as the PCHC and the Philippine Central Depository, Inc.
3. Investments in Non-Allied or Non-Related Enterprises. The broad category of undertakings in which the IB may invest in directly or through its wholly or majority-owned subsidiary shall be subject to prior approval of the Monetary Board. Investments shall be allowed in enterprises engaged in certain activities in agriculture, mining and quarrying, manufacturing, public utilities, construction, wholesale trade and community and social services following the industrial groupings in the 1977 Philippine Standard Industrial Classification (PSIC) as enumerated in Annex I of Subsection 1380.1 of the MRBOFI, as amended. Individual equity investment in undertakings within these enumerated activities shall not require prior approval: Provided, however, That within thirty (30) days after the investment, the Bank shall furnish the appropriate supervising and examining department of the Bangko Sentral such relevant information on the investments made as amount invested, name of investee company, and nature of business, accompanied by such pertinent documents as Articles of Incorporation, Articles of Partnership or Registration Certificate, whichever may be applicable, and such other information which may be required: Provided, further, That said investment is within the limits and restrictions set forth in the succeeding paragraphs of this Section.
4. Other Limitations and Restrictions on Equity Investments. The following limitations and restrictions shall also apply regarding equity investments of the IB:
5. Exclusion of Underwriting Exposure from Ceiling. The exposure of the IB arising from the firm underwriting of equity securities of enterprises shall not be counted in determining compliance with the ceiling prescribed for equity investments for a period of two (2) years from the acquisition of such equity securities.
Sec. 25. Special Cash Account
a. The total equity investments of IB in any single enterprise, whether allied or non-allied, shall not at any time exceed fifteen percent (15%) of the Bank’s net worth.
b. The total amount of investment in equities made by the IB in all enterprises, whether allied or non- allied, shall not exceed fifty percent (50%) of its net worth.
Sec. 26. Capital Funds Requirements
Sec. 27. Investment Risk Fund
1. Creation. A reserve account, known as the Investment Risk Fund, shall be created in the books of the IB, by annually setting aside an amount equal to ten percent (10%) of the profits realized during the financial year from the investment of the customers’ deposits in the following operations:
a. Financing & Investment
b. Foreign Exchange Transactions
c. Investment in Bonds & Other Islamic Financial Instruments
d. Trading Account Securities
e. Investments in Stocks
f. Equity Investments
g. Placements with Treasury Department
2. Determination of Profits and Losses. At the close of each financial year, the IB shall determine the results of its operation. The board of directors shall, after deducting the general and administrative expenses including remunerations of the board of directors and Shari’a Advisory Council, determine annually what part of the income shall be appropriated to reserves, investors and shareholders. All accounts relating to financing and joint investment operations shall be kept separate from the accounts of the other banking activities and services offered by the IB. The same rule with respect to the accounts of specific investments shall apply where such specific projects may have a separate account.
3. Utilization. The Investment Risk Fund shall be invested for the benefit of the IB in safe non-interest bearing transactions only, as authorized by the board of directors.
Sec. 28. Periodic Reports
Sec. 29. Manual of Accounts
Sec. 30. Board of Directors
Sec. 31. Power of the Board
1. credit and investment;
2. discretionary and delegated authorities
3. risk management;
4. investment risk fund;
5. qardhasan (benevolent loans); and
6. personnel policies
Sec. 32. Chief Executive Officer; Other Officers and Employees
Sec. 33. Qualifications and Disqualifications of Directors and Officers
Sec. 34. Business Development Office
1. To conduct periodic economic surveys and studies of the investment climate and opportunities in the IB’s sphere of operations and identify the viable projects which may be sponsored by the people of the Autonomous Region;
2. To offer technical consultancy services in the preparation of project studies and in meeting other technical credit requirements of the IB, including the provision of the management consultants at rates to be determined by the board of directors to projects financially assisted by the IB; and
3. To perform such other functions as may be directed by the board of directors.
Sec. 35. General Shareholder’s Meeting
Sec. 36. Purposes of General Meeting
Sec. 37. Ordinary and Extraordinary Sessions
Sec. 38. Bank Auditor; Reports
Sec. 39. Confidential Information
Sec. 40. Accounting Period
Sec. 41. Sharing between the Bank and the Investors
Sec. 42. Training of Technical Personnel
Sec. 43. Definition of Terms
1. Islamic banking business means banking business whose aims and operations do not involve interest (riba) which is prohibited by the Islamic Shari’a principles.
2. Shari’a has the meaning assigned to it by Islamic law and jurisprudence as expounded by authoritative sources; in the context of R.A. No. 6848, it is construed by reference to pertinent Quranic ordinances and applicable rules in Islamic jurisprudence on business transactions.
3. Riba has the meaning assigned to it by Islamic law and jurisprudence as expounded by authoritative sources; in the context of banking activities, the term includes the receipt and payment of interest in the various types of lending and borrowing and in the exchange of currencies on forward basis.
4. Zakat has the meaning assigned to it by Islamic law and jurisprudence as expounded by authoritative sources; in the context of R.A. No. 6848, it represents annual an “tithe” payable by the Bank on behalf of its shareholders and investors in compliance with Islamic Shari’a principles.
5. Depositors means a person or entity who has an account at an IB, whether the account is a current account, a savings account, an investment account or any other deposit account; unless the context requires another meaning, a depositor corresponds to an investor in joint investment of the IB.
6. Current account liabilities in relation to Islamic banking services mean the total deposits at the Bank which are repayable on demand.
7. Savings account liabilities in relation to Islamic banking services mean the total deposits at the IB which normally require the presentation of passbooks or such other legally acceptable documents in lieu of passbooks as approved by the Bangko Sentral for the deposit or withdrawal of money;
8. Investment account liabilities in relation to Islamic banking services mean the total deposit liabilities at the IB in respect of funds placed by a depositor with the Bank for a fixed period of time under an agreement to share the profits and losses of that bank on the investment of such funds.
9. Other deposit liabilities in relation to an IB mean the deposit liabilities at the Bank other than savings account, investment account, current account liabilities and deposit liabilities from any IB or any other licensed bank.
10. Participation in relation to Islamic banking and commercial operations means any agreement or arrangement under which the mode of joint investments or specific transactions shall not involve the element of interest charge other than as percentage share in profits and losses of business.
11. Share means share in the capital of the Bank or a corporation and includes a stock, except where a distinction between stock and share is expressed or implied.
12. Muquaradah Bonds represent long term non-interest bearing bonds of definite denomination issued and floated by the bank on the basis of participation under the Mudarabah principle to be used in financing projects for economic development.
Sec. 44. Statement of Principles
1. Al-Bai Bithaman Ajil (Deferred Payment Sale) – principle under which one sells to another by passing the ownership and delivery immediately but collects the payment later, usually by installments. This principle is applied in financing fixed asset acquisition, such as buying of houses, properties, plant and machinery, etc.
2. Al-Bai ul Takjiri (Leasing ending with ownership) – principle under which the fund-owner may purchase the asset required by the fund-user with the right to use the services of the asset, but subsequently to own the asset. Thus, the fund-owner first purchased the asset required by the fund-user and subsequently lease the asset to the fund- user with the stipulation that at a point in time the fund-user will purchase from the fund-owner the asset concerned at an agreed price with all the lease rental previously paid constituting part of the purchase price.
3. Al-Ijarah (Leasing) – principle under which the fund-owner purchases the asset required by the fund-user who acquires the right to use the services of said asset. The transaction is covered by a contract whereby the fund-owner first purchases the asset and subsequently leases the same to the beneficiary (fund- user) for a fixed, obligatory period, subject to lease rentals and other terms and conditions as may be agreed by both parties.
4. Al-Kafalah (Guarantee) – principle under which one can provide guarantee to another on behalf of a third person. This principle is applied by IBs to issue Letters of Guarantee in respect of the performance of a task, or the settlement of a loan, etc. Where a security deposit is required, it is taken under the principle of Al-Wadiah. This principle also enables the IBs to take guarantees from others for the credit facilities granted.
5. Al-Mudarabah (Trust Financing) – principle under which a fund-owner provides full financing to the fund-user who provides only entrepreneurship and labor. The fund-owner is not involved in the management of the funds at all. The return to the fund-owner and the fund-user is a share of profit at a rate or ratio agreed in advance. In case of a failure, the fund- owner bears the financial losses. This principle is applied by the IBs in both deposit taking and financing. It is mostly applied to support the investment (fixed) deposit accounts.
6. Al-Murabahah (Purchase and Sale or Cost-plus) – principle under which the fund-owner purchases the goods or assets required by the fund-user and sells at an agreed mark-up to the fund-user. This principle is applied in Bills Receivable financing. If full financing is not to be given, the fund-user would be requested to place a margin deposit which will be used to pay for a portion of the cost of the goods or assets.
7. Al-Musharaka (Partnership Profit Sharing) – principle under which a fund- owner and an entrepreneur can jointly contribute to the finance and the management of a business. Profits or losses from the joint venture are shared between them in the rate or ratio agreed in advance. This principle is applicable in both the areas of funding and financing. It is mostly applied by IBs to raise capital, to finance projects on a joint venture basis, and in Trust Receipt financing.
8. Al-Qardhasan (Benevolent Loan) – principle under which one provides a direct loan, free of any charges, to another in need. Payment of dividend for the use of the loan is at the discretion of the user of the funds. Financing economic and business activities of the poor is sometimes extended under this principle.
9. Al-Rahan (Security) – principle under which security can be given and taken for an outstanding obligation. Although IBs extend financing through partnership and trading assets, security is also taken as a precaution under this principle.
10. Al-Wadiah (Safe Custody) – principle under which a trustee will safeguard the funds entrusted without any obligation to pay any dividend to the owners of the fund (depositors) as long as a guarantee is given to ensure the full refund of the money upon request of withdrawal. The trustee can have full discretion over the use of the funds.
11. Al-Wakalah (Agency) – principle under which one acts as an agent for another for a fee. This principle is applied in the Letters of Credit (LCs) operations in which the IBs issue LCs on behalf of their importing costumers when only LC service is required. A 100% margin deposit is collected under the principle of Al-Wadiah. The deposit will be used ultimately to meet the full value of the inward bills.
Sec. 45. Sanctions
Sec. 46. Supervision; Applicability of Banking Laws, Rules and Regulations
Sec. 47. Transformation to Islamic Banking Business