Republic of the Philippines
House of Representatives
Quezon City, Metro Manila

SIXTEENTH CONGRESS
Second Regular Session

House Bit No._5989

Introduced by HON. SITTI DJALIA A. TURABIN-HATAMAN of
Anak Mindanao (AMIN) Party-List

EXPLANATORY NOTE
Financial inclusion, ethical banking and socio-economic

development through Islamic Banking system

Approval of this bill is therefore sought.

HON. ee ee


Republic of the Philippines
House of Representatives
Quezon City, Metro Manila

SIXTEENTH CONGRESS
Second Regular Session

House Brit No.__ 9989

Introduced by HON, SITTT DJALIA A. TURABIN-HATAMAN of
‘Anak Mindanao (AMIN) Party-List

An Act amending Republic Act No. 6848, also known as, “Charter of Al
Amanah_ Islamic Investment Bank of the Philippines” and_providing for the
regulation _and_ organization of an expanded Islamic banking system in_the
Philippines,

WHEREAS, the State, in Section 20, Article Il of the Constitution, encourages private
enterprise and provides incentives to needed investments;

WHEREAS, under the Constitution, the use of property bears a social function so
that the consequences in law also must be defined by policy objectives related to
property rights in productive enterprises;

WHEREAS, toward this end, the Government has committed itself to the
establishment of Islamic banks operate within a legal framework permitting the
investors or participants the rights to equitable or beneficial share in the profits
realized from financing productive activities and other operations;

WHEREAS, to promote and accelerate the socio-economic development of the
areas of its operation, there shall be created other Islamic banks and designated
Islamic_banking unit, which shall perform banking, financing and investment
operations and to establish and_participate_in_agricultural, _commercial_and
industrial ventures based on the Islamic concept of banking: Now, therefore.

Section 1: Sections ----- of Republic Act No. 6848 are hereby deleted while Sections
-- of Republic Act No. 6848 are hereby amended to read as follows:



CHARTER OF AL AMANAH ISLAMIC INVESTMENT BANK OF THE
PHILIPPINES AND PROVIDING FOR THE REGULATION AND
ORGANIZATION OF AN EXPANDED ISLAMIC BANKING SYSTEM IN THE
PHILIPPINES.

Part I- ISLAMIC BANKING SYSTEM AND ITS PURPOSE

Section 1. Title. - This Act shall be known as, an Act amending Republic Act No.
6848, also_known as “Charter of Al Amanah Islamic Investment Bank of the
Philippines and_providing for the regulation and organization of an expanded
Islamic banking system in the Philippines.

Section 2. Name, Domicile and Place of Business. - There is hereby created the Al-
‘Amanah Islamic Investment Bank of the Philippines, which shall be hereinafter
called Amanah Islamic Bank and specifically known as AIB. Its principal domicile
and place of business shall be in the Philippines.

Section 3. Establishment of other Islamic Banks. ~ Other Islamic banks may be
established as mi authorized by the Bangko Sentral ng Pilipinas (BSP). The BSP
may also authorize ban! rimarily engas in conventional banking to en, in
Islamic_banking arrangements, including structures, transactions _and_practices,
through a designated Islamic banking unit within the bank.

The Monetary Board may, under such rules as it may prescribe, authorize foreign
Islamic banks to establish Islamic banking operations in the Philippines under am

one of the modes of entry under Republic Act No, 7721, as amended by Republic Act
10641 notwithstanding the limitations under Section 2 thereof.

However, the Monetary Board may regulate the number of participants in the
Islami inking system taking into as nt the requirements of the economy, the
preservation of the stability of the system, and _the maintenance of healthy
competition,

For purposes of this Act, AIB, other Islamic banks, designated Islamic banking units
of conventional banks, and foreign banks that thorized to conduct business in
accordance with the principles of the Shari'ah_shall be referred collectively to as
“Islamic Banks” or “Islamic banking system”,

Section 4. Supervision and Regulation by the Bangko Sentral ng Pilipinas. - The
BSP shall have supervision over the operations of and exercise regulatory powers
over Islamic banks, The BSP shall issue the implementing rules and regulations on
Islamic banking.

Section. 5, Definition of Terms. - For the purposes of this Act, the following
definition of terms is hereby adopted:

Current account in relation to Islamic banking business and services means the total
deposits at Islamic Bank which are repayable on demand;
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Investment account in relation to Islamic banking business or services means the total
deposit liabilities at an Islamic Banks in respect of funds placed by a depositor or
investor with that Islamic Bank for a fixed period of time under an agreement to
share the profits and losses on the investment of such funds in accordance with the
principles and precepts of Shari'ah, including the sharing of profits and losses with
that Islamic Bank;

Islamic banking business means banking, business whose aims and operations do not
involve interest (riba) which is prohibited by the Shari'ah principles and which
conducts its business (including transactions) in accordance with the principles of
Shari'ah;

Islamic Banking Unit means a division, department, office or branch within the
conventional bank that conducts business in accordance with the principles of the
Shari'ah provided that the bank shall have a system for segregating the
transactions of the Islamic Banking Unit from the conventional banking business;

Participation in relation to Islamic banking business 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 and which is otherwise conducted
in accordance with the principles and precepts of Shari'ah;

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, including in the various types of lending and
borrowing and in the exchange of currencies on forward basis;

Savings account in relation to Islamic banking business and services means the total
deposits atthe Islamic Bank which normally require the presentation of passbooks
or such other legally acceptable documents in lieu of passbooks as approved by the
BSP for deposit or withdrawal of money; and

Share means share in the capital of the Islamic Bank or a corporation and includes a
stock, except where a distinction between stock and share is expressed o implied.

The Monet Board may, by regulation, further define or clarify terms used in this
Act consistent with the declared state policies above and taking into consideration
the peculiar characteristics of Islamic banking.

Section 6. Purpose and Basis. The primary purpose of Islamic Banks shall be to
promote and accelerate the socio-economic development of the Nation by
performing banking, financing and investment operations and by establishing and
participating in agricultural, commercial and industrial ventures based on the
Islamic concept of banking.

All business dealings and activities of an Islamic Bank shall be subject to the basic

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principles and rulings of Shari'ah within the purview of the aforementioned
declared policy.

PART I - PROVISIONS GOVERNING THE AL-AMANAH ISLAMIC
INVESTMENT BANK

Section 7. Authorized Capital Stock.- ‘The authorized capital stock of the AIB shall
be Ten billion pesos (P10,000,000,000).

The Board, upon the recommendation of the Secretary of Finance and with the
approval of the President of the Philippines, may request to increase the authorized
capital stock and total capitalization of AIB up to such amounts as may be necessary
to attain the objectives of this Act.

Section 8: Classification of Shares and Capital Structure ~ ‘The AIB's authorized
capital stock shall be classified as common shares including. all existing paid-up
shareholdings at the time of approval of this Act, AIB may be allowed to issue
preferred shares as recommended by the Board of Directors and_after_proper
clearance and approval_from the Monetary Board.

Anyone of the existing shareholders may exercise its preemptive right to
consolidate ownership of the outstanding shares as hereinafter increased; provided,
that the common shares of the AIB which have been issued and outstanding shall
form part of the increased capitalization of the AIB, subject to the concurrence of the

existing shareholders of the AIB.

The AIB is hereby authorized by this Act to reacquire its common shares that are
held privately.

Section 9, Board of Directors; Composition; Tenure; Per Diems - The affairs and
business of the Bank shall be directed and its properties managed and preserved and
its corporate powers exercised, unless otherwise provided in this Act, by a Board of
Directors consisting of at least five (5) but not more than nine (9) members, to_be
appointed by the President of the Philippines, The Chairman of the Board and the
President of the Bank shall likewise be appointed by the President of the Philippines
from among the members of the Board of Directors; Provided, That the position of
Chairman of the Board and President of the Bank shall not be held by the same
person. The term of office of the Chairman, President and Members of the Board of
Directors shall be for a period of one year or until such time as their successors are

appointed,

The Chairman shall preside at meetings of the Board and of the stockholders,

The President of the Bank shall be the Vice-Chairman of the Board, and as such, shall
assist the Chairman and act in his stead in case of absence or incapacity. In case of
incapacity or absence of both the Chairman and the Vice-Chairman, the Board of
Directors shall designate a temporary Chairman from among its members.


Appointed members of the Board of Directors shall be subject to the fit and proper
rule of the Bangko Sentral ng Pilipinas and to other qualification requirements as
prescribed by the Good Governance Commission for Government-Owned_and
Controlled Corporations (GCG) and the Monetary Board.

‘The_per_diems and other financial remuneration of the Board of Directors of AIB
shall be subject to the rules and regulations prescribed by the GCG.

The Board of Directors shall convene at the principal office at least once every
month upon due notice by the Chairman or, whenever the need arises, upon the
request of three (3) members of the Board of Directors. The Board may convene
outside the Islamic Bank's principal office as the members shall determine in the
bylaws of the Islamic Bank,_AIB shall designate at least two (2) independen
directors as required under existing banking laws and regulations.

Section 10. Powers of the Board. - The Board of Directors shall have the broadest
powers to manage the Islamic Bank, except such matters as are explicitly reserved
for the general shareholders meeting. The Board shall adopt policy guidelines
necessary to carry out effectively the provisions of this Act as well as internal rules
and regulations necessary for the conduct of its Islamic banking business and all
matters. related 10 personnel organization, office functions and salary
administration.

‘The Board of Directors shall have the power to appoint managers, authorize agents
or legal representatives and shall vest them with signing authority on behalf of the
Bank either severally or jointly in accordance with the operational procedures of the
Bank.

The Board shall cause the preparation of the AIB’s financial according to generally
accepted accounting principles established and appropriate for Islamic banking.
Copies of the audited financial statements shall be provided to the shareholders
before the date of the general meeting.

Section. 11, President; Chief Executive Officer; Other Officers, Employees and Units,
~ The Chief Executive Officer of the Bank shall be the President who shall_be
appointed by the President of the Philippines. The President and Chief Executive
Officer, together with the other Bank Officers must meet the minimum requirements
of the BSP for Bank Officers. Provided that in the event that the Bank is privatized
with at least 51 percent of equity or ownership is held privately, the appointment
by the President of the Philippines for the President and Chief Executive Officer

shall no longer apply.

The President shall, among other powers and duties, execute, carry out_and
administer the policies, measures, orders and resolutions approved by the Board;
direct and supervise the operation and administration of the Bank; and exercise
such other posers and perform such other functions or duties as may be directed to
be assigned to him by law or by the Board from time to time,



Particularly, the President of the Bank shall have the power and duty:

(a) To sign and execute all contracts concluded by the Bank and enter into all
necessary obligations required or permitted by this Act, upon proper
authorization by the Board; and sign all notes, securities, certificates and
other major documents of the Bank;

(b) To exercise, as Chief Executive Officer of the Bank, the powers of control and
‘Supervision over decisions and actions of subordinate officers and all other
powers that may be granted by the Board;

(©) To report to the Board the main facts concerning the operations of the Bank
and to recommend changes in policies which he may deem advisable;

(a) To submit an annual report to the President of the Philippines on the result
of the operations of the Bank;

(©) To recommend to the Board the appointment, promotion or removal of all
officers of the Bank, with the rank of at least Vice-President or its equivalent;

(© _To appoint, promote or remove employees and officers below the rank of
Vice President or its equivalent: Provided, that_promotions, transfers,
assignments or reassignments of officers and personnel of the Bank are
personnel actions deemed made in the interest of the service and not
disciplinary, any provision of the Civil Service Law to the contrary
notwithstanding; and

(g) _As required by circumstances, to delegate any of his powers, duties or
functions to any officer or director of the Bank, with the approval of the
Board.

n. 12. General Shareholders Meeting. - The general shareholders meeting shall
convene annually at the latest within six (6) months following the end of the
financial year of AIB at the place, date and time fixed in the notice for the meeting,
The attendance of shareholders representing, at least sixty per centum (60%) of the
capital of the AIB shall constitute a quorum to do business. The purpose, date,
place, the manner of giving notice and other matters relating to the holding of the
general shareholders meeting shall be provided in the by-laws of the AIB_in
conformity with Section 20 of this Act, subject to the applicable provisions of the
Corporation Code of the Philippin:

Section. 13. Purpose of General Meeting. - The general shareholders meeting shall
convene purposely to hear the Board of Directors’ report on the activities of the AIB,
its financial condition, the auditor's report, to approve the annual financial
statements, to determine the portion of dividends to be distributed to the
shareholders and the method of distribution, to appoint the auditors, and to elect
the members of the Shari'ah Advisory Council.

For purposes of this section, “Capital” shall refer to the Total Subscribed Capital,
whether paid or unpaid.

Section. 14. Ordinary and Extraordinary Sessions. - The general shareholders
meeting shall be presided over by the Chairman of the Board of Directors. All
resolutions adopted by the general meeting in ordinary session assembled shall be

7


taken by a vote of the shareholders representing at least a majority of the
outstanding shares and in case of votes being equal, the Chairman shalll cast his vote
to break the tie. The resolutions of the general meeting adopted in accordance
therewith shall be binding on all shareholders including those not in attendance or
opposing the resolution.

Anextraordinary general meeting shall be required to pass resolutions related to the
increase or decrease of capital of AIB, the extension of its legal existence or matters
affecting amendment of the Charter. Resolutions of the extraordinary general
meeting shalll be deemed adopted when a majority vote of at least sixty-six and two-
thirds plus one per centum (66 & 2/3 + 1%) of the capital shares shall have been
cast.

In no case shalll the general meeting resolve to modify the object of the Bank as an
Islamic Investment Bank.

Section. 15, Bank Auditor. Reports, - Notwithstanding the provisions of any existing
law to the contrary, AIB is hereby authorized to appoint an external auditor
approved by the general shareholders meeting whose qualification and
remunerations shall be fixed by the Board of Directors. The external auditor
appointed under this section shall assume his functions from the date of his
appointment until the date of the next general shareholders meeting. In case a
vacancy occurs at any time during the year for any reason, the Board of Directors
shall immediately appoint a replacement.

‘The duties of the auditor shall be to conduct an audit of the accounts of the Bank
and to make a report to the Board of Directors.

In the exercise of his auditing functions, all Bank books, accounts and documents
shall be made available to the auditor for inspection to ascertain the Bank's assets
and obligations. Copies of the latest audited financial statements, and the reports of
the auditor to the Board of Directors shall be forwarded by the AIB, within the
prescribed time as may be determined in the implementing rules and regulations, to
the BSP.

Section. 16. Employee Share Schemes. - Subject to applicable rules and regulations
issued by the BSP, the Board of Directors may adopt an employee profit sharing
scheme under any of the following ways:

(1) Any arrangement under which the directors, officers and employees of the
Islamic Bank receive in addition to their salaries and wages a share, fixed
beforehand, in the profits realized by the AIB or by affiliate companies of the AIB to
which the profit sharing scheme relates; and

2) Any arrangement under which AIB 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.


No scheme shall be approved by the Board of Directors under this section unless it
is satisfied that the participant in the profit sharing scheme is bound by a contract
with the AIB by virtue of which an appropriation of shares has been made for the
purpose. The shares so purchased or appropriated shall be deposited in escrow
with the AIB.

The AIB shall then constitute the trustees of an approved scheme, whose functions
with respect to the common shares held by them are regulated by Chapter IX of the
General Banking Law_of 2000 and other pertinent laws, and terms of which are
embodied in a deed of instrument as the Board may require.

Section. 17. Terms of Legal Existence. - The legal existence of the AIB shall be for a
period of fifty (50) years, from the date of the approval of this Act, renewable upon
resolution of the general shareholders meeting called for said purpose.

At the expiration of the AIB’s corporate existence or in the event of its dissolution
before this date, the general shareholders meeting shall, upon the request of the
Board of Directors, define the method of dissolution as provided for in its by-laws.

Section, 18, Privatization. - Nothing in this Act shall be construed to preclude thean
‘AIB - from privatizing its ownership. For this purpose, any limitation on the transfer
of shares shall not be applicable with respect to the exiting shareholdings of the
government or any of its instrumentalities.

In the event of privatization, the Bank shall be registered with the
Exchange Commission, and_shall_be_subject_to_applicable_provisions of the
Corporation Law in addition to_the rules and regulations of the Bangko Sentral ng
Pilipinas and other government regulatory agencies.

Section 19. Statutory Articles of Incorporation. - This Act, upon its effectivity, shall
be deemed accepted for all legal intents and purposes as the Statutory Articles of
Incorporation of the AIB; and that notwithstanding the provisions of any existing
law to the contrary, the AIB shall be deemed registered and duly authorized to do
business and operate as an Islamic Bank as of the date of approval of this Act.

Section. 20. By-laws. - Within sixty (60) days upon effectivity of this Act, the by-
laws of the AIB for its organizational, functional and operational government and
procedure shall be adopted by affirmative vote at the general shareholders meeting
representing a majority of all subscribed capital stock entitled to vote, whether paid
or unpaid, subject to certification by the Monetary Board pursuant to Section 14 of
the General Banking Law of 2000.

The by-laws, duly certified by the Monetary Board as aforesaid, shall be signed by
the shareholders voting for them and shall be kept in the principal office of the AIB,
subject to the inspection of the shareholders during office hours, and a copy thereof,
duly certified by a majority of the directors and countersigned by the Corporate
Secretary of the AIB, shall be filed and registered with the Securities and Exchange

9


Commission.

PART III - GENERAL PROVISIONS

1 21. Shari'a Advisory Councils. - It shall be the responsibility of an Islamic
jank to ensure its compliance with Shari'ah principles. For this purpose, it shall
constitute its Shari'ah Advisory Council,

The functions of the Shari'ah Advisory Council shall be to offer advice and
undertake reviews pertaining to the application the principles and rulings of the
Shari'a but it shall not directly involve itself in the operations of the Islamic Bank.

Section 22. Islamic Bank's Powers. - In addition to the general powers incident to
‘orporations, Islamic banks shall all have such powers as shall be necessary and
prudent to carry out the business of a bank in accordance with Sharia principles.

Islamic banks may:

1.) perform the following banking servi

a. accept or create demand deposits;

b, accept saving accounts for safekeeping or custody with no participation in
profit and losses except unless otherwise authorized by the account holders to be
invested

¢. accept investment account placements and invest the same for a term with the
Islamic Bank's funds in Shari'ah compliant transaction on participation or agency
bi

d. accept foreign currency deposits;

e._act as correspondent of banks and institutions to handle remittances or any
fund transfers;

___f,_ accept drafts and issue letters of credit or letters of guarantee, negotiate notes
and bills of exchange and other evidence of indebtedness under the universall
accepted Shari'ah compliant financial instruments;

g. act as collection agent insofar as the payment orders, bills of exchange or
‘other commercial documents are exclusive of _riba_or_interest_ prohibitions;

h._provide financing with or without collateral by way of leasing, sale and
leaseback, cost-plus_profit sales arrangements, and_other Shari'ah compliant
financing contracts and structures;

i, handle storage operations for goods or commodity financing secured by
warehouse receipts presented to the Islamic Bank;

j._issue shares for the account of institutions and companies assisted _by the
Islamic Bank in meeting subscription calls or augmenting their capital and/or fund
requirements as maybe allowed by law:

k. undertake various investments in all transactions allowed by Shari'ah in such
a way that shall not permit the haram (forbidden), nor forbid the halal (permissible);
and

1._such other banking services as may be authorized by the Monetary Board;

2)_with prior Monetary Board approval, issue investment participation certificates,
10


sukuk, and other Shari'ah compliant funding instruments to be used by the Islamic
bank in its operations or capital notes;

3)_to carry out financing and joint investment operations by way of mudarabalt
parinership, musharakah joint venture or by decreasing participation, murabalah

s_on arrangement, lease _({jara)
arrangements, construction and manufacture (istisna'a) arrangements, and other
Shari'ah compliant contracts and structures 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 Islamic Bank on a joint Mudarabah basis in
accordance with the foregoing arrangements, contract and structures;

4) with prior MB approval, invest _in_equities_of the Shari'ah compliant
undertakings that directly support the delivery of Islamic banking and financing
services; and

Shari'ah principles.
Section 23. Ownership and Legal Existence - Other Islamic Banks to be created

under this Act shall comply with the requirements of applicable laws, rules and
regulations in the organization of a private corporation engaged in banking, such as
under the Corporation Code of the Philippines, and in compliance with the
requirements of the respective regulatory agencies,

The total capitalization of other Islamic Banks shall be equivalent to the prescribed
capitalization of a Universal Bank as prescribed by the BSP. The AIB and other
Islamic Banks may take the necessary steps to have shares listed in any duly
registered stock exchange.

The legal existence of other Islamic Banks © mn this Act shall conform with
the provisions of the Corporation Code.

The enactment and approval of the by-laws of Islamic Banks shall conform

with the provisions of the Corporation Code and the rules and regul
BSP and the SEC,

Section 24, Transfer and Acquisition of Substantial Shareholdings. - No person
shall acquire shares in an Islamic Bank that will result in ownership or control,
directly or indirectly, of more than ten percent (10%) of the voting stock of such
Islamic Bank, without obtaining the prior approval of the Monetary Board, Prior to

Monetary Board approval, no such transfer or acquisition of shares shall have legal
effect nor shall the same be recognized in the stock and transfer books of the Islamic

Bank nor in the records of any government agency.

management and afford better protection to depositors, investors and the public in
general, the Monetary Board shall prescribe, pass upon and review _ the

it



qualifications of persons who are elected or appointed bank directors or officers and
disqualify those found unfit. The Monetary Board shall prescribe the qualifications
of bank directors and officers for purposes of this Act.

Section 26. Regulatory Standards. ~ Islamic banks shall be licensed and regulated
analogous to the treatment accorded to a Universal bank.

The Bangko Sentral ng Pilipinas shall specify prudential and conduct standards and
regulations to promote:

(a) the sound financial position of Islamic banks; and

(b) integrity, professionalism and expertise in their conduct of the business, affairs
and activities

These_standards shall take into consideration international_best_practices_and
principles relating to, but not limited to:

(a) capital adequacy;
‘(@) liquidity;
(0) corporate governance;
(d) risk mé ment;
(¢) related party transactions;
(f) maintenance of reserve funds;
(g) prudential reporting;
(h) investment ceilings and limitations;
(@_prevention of an institution from being used, intentionally or unintentionally, for
unlawful activities; and

(i) consumer protection,

Section 27. Current Accounts of Islamic Banks. - The BSP is authorized to open
current accounts for Islamic banks for settlement and other purposes under such
rules and regulations as the Monetary Board may prescribe: Provided, That the

Bangko Sentral may charge administrative and other fees for the maintenance of
such facilities as may be allowed by Shari'ah principles.

Section 28. Financial Facilities for Islamic Banks. ~The BSP may, taking into
consideration the peculiar characteristics of Islamic banking, formulate rules and
regulations for the extension of financial facilities to Islamic banks for purposes
provided under Chapter IV, Articles IV and V of Republic Act No. 7653.

Subject_to_availability of budgetary support_and other funding sources, the
Philippine Deposit Insurance Corporation (PDIC) may extend financial assistance to
an Islamic bank determined to be in danger of closing in order to prevent such
closing or when it is determined by the Monetary Board and the PDIC Board of
Directors that the continued operation of such Islamic bank is essential to maintain
financial stability in the economy.

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Section 29. Monetary Stabilization Policy and Tools, ~ Pursuant to the authority of
the Monetary Board under Section 61 of The New Central Bank Act to control the
expansion or contraction in monetary aggregates prejudicial to the maintenance of
price stability, the BSP, taking into consideration the peculiar characteristics of
Islamic_banking, may require Islamic banks to maintain reserves against their
deposit accounts_and funds held in trust or under investment accounts. The
Monetary Board may further identify other appropriate instruments and measures
necessary to effect its monetary policy, including whenever there are abnormal
movements in monetary aggregates, provided the peculiar characteristics of Islamic
banking a unt,

Section 30. Tax Neutrality. - The Government shall endeavour to achieve neutral
tax treatment between Islamic banking transactions and equivalent conventional
banking transactions. The Bureau of Internal enue (BIR), pursuant to its rule-
making power, shall issue policies and guidelines to_implement_tax_neutrality

conducive to the growth of Islamic banking and finance in the country. To achieve
tax neutrality, the BIR may modify applicable taxes on Islamic banking transactions.

Section 31. Non-Applicability of Selected Acts. - In order to achieve the
international and domestic objectives of Islamic banking business, the provisions of
the following acts and laws shall not apply to the Islamic Banks to the extent as
herein rendered inoperative:

(1) The provisions of R.A. No. 7653, otherwise known as The New Central Bank Act,
and R.A. No. 8791, otherwise known as The General Banking Law of 2000, with
particular reference to the determination of bank interest rates, loans and discounts,
and any interest-bearing instruments or charge: provided, that nothing contained
herein shall be construed to impair the powers of the Bangko Sentral ng Pilipinas to
supervise and regulate the activities of the Islamic banking system;

(2) The provisions of Presidential Decree 1445, otherwise known as “The General
Auditing Act” and any other enactments thereon inconsistent with this Act; and

(3) The provision of R.A. No. 3591, as amended, otherwise known as the “PDIC
Charter” and all laws, regulating insurance companies: provided, however, that
nothing contained herein shall preclude the Islamic Banks anc-Islamic banking units
from the establishment of contemporary Islamic tafekul (solidarity services) free of
riba premiums or interests.

Section 32. Sanctions, - Any director, officer, employee, auditor, or agent of an
Islamic Bank who is found guilty of acts or omissions in violation of any provision
of this Act and its implementing rules and regulations shall be punished by a fine
not exceeding One million pesos (P1,000,000.00) or by imprisonment of not more
than five (5) years, or both at the discretion of the court, without prejudice to the
administrative and criminal sanctions that may be imposed pursuant to existing
banking laws and regulations.

Section 33, Consumer Protection and Capacity Building Program - The Government
13


shall_provide programs for increased consumer awareness and capacity building
required by the expanded Islamic banking system.

Section 34. Repealing and Separability Clauses. - R.A, No. 6848 is hereby amended.

All. acts, executive orders, administrative orders, proclamations, rules and
regulations or parts thereof inconsistent with any of the provisions of this Act are
hereby repealed or modified accordingly.

If any provision or section of this Act or the application thereof to any person,
association or circumstances is held invalid, the other pertinent provisions or section
of this Act and their application to such person, association or circumstances shall
not be affected thereby.

Section 2: Any provisions of existing law, rules and regulations inconsistent with the
provisions of this Decree as to its application to Islamic Banking are hereby repealed
and modified accordingly.

If any provision or section of this Act or the application thereof to any person,
association or circumstances is held invalid, the other pertinent provisions or section of
this Act and their application to such person, association or circumstances shall not be
affected thereby.

Section 3. This Act shall take effect fifteen (15) days after publication.

Done in

Approved,

HON. ttt IA A, TURABIN-HATAMAN,

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