EPRESy

Eyre, DEC 0 6

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
‘Third Regular Session

House Bil No, 742

Ky
[2 RECEIVED “2

18

Introduced by HON. AMIHILDA J. SANGCOPAN of Anak Mindanao
(AMIN) Party-List

EXPLANATORY NOTE

The Philippines is a pioneer in Islamic Finance with the establishment of
the Philippine Amanah Bank in 1973 by Presidential Decree 264. It is one of the
oldest Islamic banks in the world. The Al-Amanah Islamic Investment Bank of the
Philippines (AAIIBP), a subsidiary of the Development Bank of the Philippines, is
the only Islamic bank in the country. Since the creation of the Al-Amanah Bank
over 40 years ago, there are no other Islamic banks established in the Philippines
thereby ceasing its leadership in Islamic finance in the region.

Undeniably, the operations of Islamic financial institutions worldwide is
growing in number to over 75 countries from an initial of 30. Locally, the AAIIBP
is drawing interest from the national government considering the priority given
to Mindanao in terms of the socio-economic agenda of the administration.
Moreover, the rebuilding of the war-devastated Marawi, the only Islamic City in
the Country, needs an enormous amount of financial resources.

Finally, with the economic integration of the Association of Southeast Asian
Nations (ASEAN) whereby member nations have established the framework for
integration of their financial and banking markets thru qualified ASEAN banks
(QABs), it is high time to take bold steps in order to encourage and enable local
banks to enhance their capabilities in Islamic banking and finance toward regional
competitiveness.

With the scheduled implementation of the ASEAN integration, the

Philippines can harness greater economic opportunities in pushing for Islamic
Finance and to complement Halal as a tool to achieve inclusive growth. Philippine

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legislators and economic managers must work hand in hand to look at Islamic
Finance and support it as a source of productive and ethical investments. Access
to Islamic funds is also a political solution, paving the way for greater participation
of Muslim Filipinos to nation-building, benefitting the whole Filipino nation.

With the Roadmap for the Al-Amanah Islamic Investment Bank in mind,
this bill hopes to address the scarcity of resources; inadequacy of technical
knowledge; poor appreciation of the general public on Islamic Finance even the
Muslim communities in Mindanao; lack of government infrastructure to
implement Islamic banking; identification of possible tie-ups with foreign Islamic
countries and banks.

In view of the foregoing, the immediate passage of this bill is urgently
sought.

HON. AMJHI! SANGCOPAN


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
Third Regular Session
8742

House Bill No.

Introduced by HON. AMIHILDA J. SANGCOPAN of Anak Mindanao (AMIN)

“AN ACT STRENGTHENING THE AL-AMANAH ISLAMIC BANK AMENDING FOR THE
PURPOSE REPUBLIC ACT NO. 6848, OTHERWISE KNOWN AS THE CHARTER OF
THE AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES, AND
AUTHORIZING ITS CONDUCT OF ISLAMIC BANKING AND INVESTMENT."

Part I - ISLAMIC BANKING SYSTEM AND ITS PURPOSE

Section 1. Title. - This Act shall be known and cited as the Al-Amanah Islamic
Bank of the Philippines Act of 2018

Section 2. Declaration of Policy. - The State, in Section 20, Article II of the
Constitution, encourages private enterprise and provides incentives to needed
investments. Further, the Constitution demands that the use of property bears a
social function so that the consequences in law must also be defined by policy
objectives related to property rights in productive enterprises. Toward this end,
the Government, recognizing the role of Fiipino-Muslim communities in nation
building by allowing them to freely participate in financing and investments in
accordance with the requirements of their religion, has committed itself to the
establishment of an Islamic bank which shall operate within a legal framework
that will permit its investors or participants the rights to equitable and beneficial
share in the profits realized from financing productive activities and other
operations.



Section 3. Name, Domicile, and Place of Business. - There is hereby created the
Al-Amanah Islamic Investment Bank of the Philippines, which shall be
hereinafter called the Al-Amanah Islamic Bank, and specifically known as “AIB”.
Its principal domicile and place of business shall be in Zamboanga City,
Philippines.

Section 4. Definition of Terms. - For the purposes of this Act, the following

terms shall be defined as follows:
(a) AIB means the bank created under this Act and referred to as either
“the AIB” or “the Bank”;
(b) Islamic banking business means banking business which conducts its
transactions in accordance with the principles of Shari‘ah, and whose aims
and operations do not involve interest (riba), uncertainty in subject matter
and contractual term (gharar), and gambling (maysir) which are prohibited
by the Islamic Shariah principle;
(©) Shari'ah has the meaning assigned to it by Islamic law and
jurisprudence as expounded by authoritative sources; in the context of this
Act, it is construed by reference to pertinent Quranic ordinances and
applicable rules in Islamic jurisprudence on business transactions;
(d) Ribahas 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;
(e) Zakathas the meaning assigned to it by Islamic law and jurisprudence
‘as expounded by authoritative sources; in the context of this Act, it
represents an annual “ithe” payable by the Bank on behalf of its
shareholders and investors in compliance with Islamic Shari’ah’s
principles;
(f) Current account liabilities in relation to Islamic banking services
means the total deposits at the bank which are repayable on demand;
(g) Savings account liabilities in relation to Islamic banking services
means the total deposits at the Islamic Bank which normally require the
presentation of passbooks or such other legally acceptable documents in
lieu of passbooks as approved by the BangkoSentral ng Pilipinas for
deposit or withdrawal of money;
(h) Investment account liabilities in relation to Islamic banking services
means the total deposit liabilities at the AIB in respect of funds placed by a
depositor with that 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;



(i) Other deposit liabilities in relation to AIB means the deposit liabilities
at that bank other than savings account, investment account, current
account liabilities and deposit liabilities from any other licensed bank;

(j) 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;

(k) Share means share in the capital of the Bank and includes a stock,
except where a distinction between stock and share is expressed or
implied;

()) Mudarabahrefers to the partnership contract between the capital
provider and an entrepreneur (mudarib) whereby the capital provider
would contribute capital to an enterprise or activity that is to be managed
by the entrepreneur. Profits generated by that enterprise or activity are
shared in accordance with the percentage agreed by the parties in the
contract, while losses are to be borne solely by the capital provider unless
the losses are due to misconduct, negligence, or breach of contracted terms
by the entrepreneur;

(m) Musharakarefers to a partnership contract or joint venture agreement
in which the partners agree to contribute capital to an enterprise, whether
existing or new. Profits generated by that enterprise are shared in
accordance with the percentage specified in the musharakah contract,
while losses are shared in proportion to each partner's share of capital;

(n) Tafukul refers to a Shari’ah-compliant insurance mechanism
employing, among others, mutual guarantee in return for the commitment
to donate an amount in the form of a specified contribution to the
participants’ risk fund, whereby a group of participants agree among
themselves to support one another jointly for the losses arising from
specified risks;

(0) Haramis an Arabic term meaning "forbidden". Haram is anything that
is prohibited by the faith. Its antonym is halal;

(p) Halal is an Arabic word meaning lawful or permitted;

Section 5. Purpose and Basis. - The primary purpose of establishing and
institutionalizing the AIB 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, in accordance with the precepts and principles of Islam.

All business dealings and activities of the AIB shall be subject to the basic
principles and rulings of Shari’ah aligned with Section 2 of this Act.


Section 6. The Powers of the AIB. - The AIB, upon its organization, shall be a
body corporate and shall have the powers:

(a) To prescribe its by-laws and operating policies;
(b) To adopt, alter, and use a corporate seal;
(c) To enter into and deliver contracts, and to sue and be sued;
(d) To borrow money; own real or personal property and introduce
improvements thereon, and to sell, mortgage, or otherwise dispose of the
same;
(e) To employ such officers and personnel, preferably from the qualified
Muslim sector, as may be necessary to carry out Islamic banking business;
(f) To establish such branches and agencies in provinces and cities in the
Philippines, particularly where Muslims are predominantly located, and
such other offices in other areas in the country or abroad as may be
necessary to carry out its Islamic banking business;
(g) To perform Islamic banking and finance services;
(h) With prior approval of the Monetary Board (“MB”) of the
BangkoSentral ng Pilipinas (“BSP”), to issue investment participation
certificates, sukuk, and other Shari'ah compliant funding instruments to be
used by the Bank in its operations or capital notes;
(i) To invest in equities of the following allied undertakin;
(i) Warehousing companies;
(ii) Leasing companies;
(iii) Storage companies;
(iv) Safe deposit box companies;
(v) Companies engaged in the management of mutual funds but
not in the mutual funds themselves; and
(vi) Such other similar activities as the Monetary Board of the
BangkoSentral ng Pilipinas has declared or may declare as
appropriate from time to time, subject to existing limitations
imposed by law.
(j) With prior MB approval, to invest in equities of the Shari’ah compliant
undertakings that directly support the delivery of Islamic banking and
financing services;
(k) To act as an official government depository, or its branches,
subdivisions, and instrumentalities and of government-owned or
controlled corporations, particularly those doing business in the
autonomous region;
(I) The AIB shall exercise all the powers and perform all the services of a
bank, except as otherwise prohibited by this Act;
(m)Notwithstanding the provisions of any law to the contrary, the AIB is
hereby authorized to operate an Investment House pursuant to
Presidential Decree No. 129, as amended, and as a Venture Capital

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Corporation, pursuant to Presidential Decree No. 1688 and, by virtue
thereof, carry on the following types of commercial operations:
() The AIB 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;
(ii) The AIB 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
(iii) The AIB may perform all business ventures and transactions as
may be necessary to carry out the objectives of its charter within the
framework of the Islamic Bank'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'ah principles.
(n) To exercise the powers granted under this Charter and such incidental
powers as may be necessary to carry on its business, and to exercise
further the general powers mentioned in the Corporation Code of the
Philippines and the General Banking Law, insofar as they are not
inconsistent or incompatible with the provisions of this Charter.

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

Section 7. Authorized Capital Stock. - The authorized capital stock of the AIB
shall be ten (10) billion pesos (P10,000,000,000.00) divided into one hundred
million shares with par value of one hundred pesos each. Provided, that sixty
million shares thereof shall be subscribed and paid by the National Government
as paid up capital through the Bangsamoro Autonomous Region pursuant to
Section 6, paragraphs c) and k), Article XII of Republic Act No. 11054. Provided
further that, such paid up capital shall be automatically infused to the Bank
immediately after the effectivity of this Act.


Section 8. Classification of Shares. - The Bank’s authorized capital stock shall
have the following classifications and features in relation to its Islamic banking
operations:

(a) Series “A” shares shall be comprised of sixty million shares equivalent to
six billion pesos to be subscribed and paid by the National Government
through its present stockholders - the Development Bank of the
Philippines and/or such other financial entities as the National
Government may designate.

(b) Series “B” shall be comprised of ten million shares equivalent to one
billion pesos to be made available for subscription by Filipino individuals
and institutions.

(c) Series “C” shares shall be comprised of thirty million shares equivalent to
three billion pesos to be made available for subscription by Filipino and
foreign individuals and/or institutions or entities.

Anyone of the shareholders may exercise its pre-emptive 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 its increased capitalization, subject to the concurrence of its existing
shareholder. The AIB is authorized to reacquire its common shares that are held
privately. The AIB may take the necessary steps to have its Series “B”and Series
“C” shares listed in any duly registered stock exchange.

Section 9.Board of Directors; Composition, Tenure, and Per Diems.-Unless
otherwise provided in this Act, the corporate powers of AIB shall be exercised, its
business directed and its properties managed and preserved 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 AIB 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 BangkoSentral 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 AIB’s principal office as the members shall determine in the bylaws
of AIB. AIB shall designate the required number of independent directors under
existing banking laws and regulations.

Section 10.Powers of the Board. - The Board of Directors shall be the governing
body of AIB and shall have the broadest powers to manage the AIB, except such
matters as are expressly reserved by the shareholders at 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 and
affecting the conduct of its business, expenditures, and all matters in connection
and relating to administration and management including office functions,
personnel organization, functions and duties, salary, and other incentives and
emoluments authorized by law.

The Board of Directors shall have the power to appoint managers, hire and
authorize agents, legal representatives and technical consultants, subject to the
requirements and rules of the Commission on Audit.

‘The Board shall cause the preparation of AIB’s financial statements 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.

The Board is authorized to establish a personnel welfare fund for the benefit of
all officers and permanent employees of the Bank. Members of the Board may
likewise enroll in said welfare fund; Provided, that they are not appointed to the
governing board or become officers or personnel of the Personnel Provident
Fund (“PPF”) and that they may avail of the benefits or product under the PPF
but proportionate to their enrollment and contribution; Provided further, that AIB
does not share with respect to their monthly contributions.


The Board is likewise authorized to defray the costs of study, at home or abroad
of outstanding employees of the AIB, of promising university graduates or of
any other qualified persons who shall be determined by proper competitive
examinations. The Board of Directors shall prescribe rules and regulations to
govern the training program of the AIB.

Section 11. Shari'ah Advisory Council (SAC); Creation, Composition,
Qualification, Election, Term, Functions, and Limitations. - To ensure its
compliance with Shariah principles, the AIB shall constitute anShari’ah
Advisory Council (“SAC”) composed of not more than five (5) but not less than
three (3) members.

As minimum qualification requirements, all persons to be appointed as members
of the SAC must be Islamic scholars and jurists of Islamic comparative law and
majority must have obtained a degree or have at least three (3) years work
experience and proficiency in Islamic banking and finance.

The members shall be elected for a term of not more than three (3) years at a
general shareholders meeting from the list of nominees submitted by the Board.
AIB shall include in its by-laws the internal procedures, limitations, detailed
functions, and relevant framework that will be implemented in the fulfillment of
functions and mandate of the SAC.

The SAC shall give advice and undertake reviews pertaining to the application of
Islamic principles and Shari‘ah rulings on AIB’s transaction, including its Islamic
products, and shall provide inputs on the development and improvement of
Islamic banking products.

Any or all of the members may be invited by the BOD in the regular or special
meetings to expound on his/their views on matters of Islamic Shari’ah affecting
a particular transaction but shall not be entitled to vote on the question presented
before the Board.

Section 12. Meetings. -The general shareholders meeting shall convene annually
at the latest and 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 for in the by-laws of AIB in conformity
with Section 32 of this Act, subject to the applicable provisions of the Corporation


Code of the Philippines. Likewise, other meetings necessary in the efficient
conduct of business of the AIB shall be provided for in the by-laws of the Bank.

Section 13. - The President, other Officers and Employees. - The President shall
be the chief executive officer of AIB who shall be appointed by the President of
the Republic of the Philippines. He shall be the Vice-Chairman of the Board of
Directors and can be replaced only upon assumption of his successor duly
appointed. All other officers and employees of the Islamic Bank shall be
appointed by the Board of Directors and shall be subject to Civil Service Rules.

The AIB President shall, among others, execute and administer the policies,
measures, orders, and resolutions approved by the Board of Directors, in
particular, he/she shall have the power and duty: to execute all contracts on
behalf of AIB and to enter into all necessary obligations by this Charter required
or permitted; to report to the Board the main facts concerning the operations of
the AIB during regular meetings. He may call for special board meetings on
matters affecting the operation of the Bank or its business which require
immediate action and its disposal can be made only by the Board.

Section 14.Employee Share Schemes. - The Board of Directors may adopt an
employee profit sharing scheme under the following:

(a) Any arrangement under which the directors, officers and employees
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

(b) 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 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. The
terms of the approved scheme shall be embodied in a deed of instrument as the
Board may require.


Section 15. Investment of Funds. - The AIB shall have the capacity of agent or
attorney and shall act with full authority on behalf of the group of depositors in
general in investing their co-mingled deposits and shall ensure a degree of
liquidity to be determined by the Board to meet the current obligations of the
Islamic Bank, including drawings from savings accounts and current accounts:
Provided, that such degree of liquidity shall be subject to the reserve requirement
as may be determined by the BangkoSental ng Pilipinas. The Board shall
determine the period for an investment participation account. Investment of
funds shall be undertaken by the AIB acting on behalf of the group of depositors
or investors in selected areas of investment under such terms and conditions as
the Board may determine by way of mudarabah or other forms of joint investment
permitted by Islamic Shari'ah principle.

Section 16. Incentives to Islamic Banking. - Subject to the provisions of Section 72
of the New Central Bank Act (R. A. No. 7653) covering “Emergency Restrictions on
Exchange Operations,” the provisions of the Omnibus Investment Code on the
basic rights and guarantees of investors are made applicable to the commercial
operations of the Islamic Bank in respect to repatriation or remittance of profits
from investments, and to protection against nationalization, sequestrations, or
expropriation proceedings. Any proceeding of judicial or administrative seizure
may not be taken against the said property or investment except upon a final
court judgment.

Section 17.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
BSP may charge administrative and other fees for the maintenance of such
facilities as may be allowed under Shariah principles.

Section 18.Capital Funds Requirement. ~ AIB shall maintain its combined capital
accounts in proportion to its assets as prescribed by the General Banking Law
and subject to the rules and regulations, as well as compliance and monitoring
requirements of the BangkoSentral ng Philippines.

Section 19. Grants and Donations. - AIB shall accept grants, donations,
endowments, and subsidies, or funds and/or property offered by individuals
and organizations, who may earmark such grants for a specific purpose or for
such other purposes beneficial to the Muslim communities, without prejudice to
the general objectives of AIB.

The financial statement and books of accounts of such funds shall be maintained
separately but may be supplemented to the AIB’s balance sheet.

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Under special circumstances in which the Board considers it advisable to
promote or facilitate Islamic banking business and commercial operations, the
AIB may seek financing from governments, organizations, individuals, or banks
always without prejudice to Section 5 of this Charter.

AIB may also become a depository of institutions who are allowed and
authorized to receive zakat or ithe. Subject to AMLC requirements, AIB, before
allowing such institution to open an account, shall refer to its own SAC to
determine the competence, qualification and reputation of the institution.
Independent of AIB’s compliance with AMLC, the AIB, to ensure its Shari'ah
compliance, may also conduct a regular background information check on the
institution at any time during the life of the depository and may submit the
result thereof to the SAC for its review and recommendation.

Section 20. Accounting Period. - The Financial Year of the AIB shall be based on
the Gregorian calendar, but the corresponding Islamic Hijra date shall be
mentioned on all correspondences, contracts, printed materials, forms, and
records of the AIB. The accounting period shall commence from the first day of
January and close at the end of December of each year.

Section 21. Tax Neutrality.-The Government shall endeavour to achieve neutral
tax treatment between Islamic banking transactions and equivalent conventional
banking transactions. The Secretary of Finance, upon the recommendation of the
Commissioner of the Bureau of internal Revenue (“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.

Section 22. Exemption from Customs Duties. ~ Following the effectivity of this
Act, all importations by the Bank of machinery, equipment, and computers, and
accompanying spare parts, as may be necessary or incidental to its operation,
shall be exempt from customs duties and compensating taxes payable thereon:
Provided, however, that the same shall not be disposed of domestically unless
payment is made of all duties thereof at the tariff rates and according to their
condition at the time of disposal and upon compliance with all import and
exchange procedures.

Section 23. 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 AIB to the extent as herein
rendered inoperative:

(a) The provisions of the BankoSentral ng Pilipinas and the General Banking
Act, with particular reference to the determination of bank interest rates,

11


loans, and discounts, and any interest-bearing instruments or charge: Provided,
that nothing contained herein shall be construed to impair the powers of the
BangkoSentral ng Pilipinas to supervise and regulate the activities of the AIB;
and

(b) The provision of Republic Act Numbered Three Thousand Five Hundred
Ninety-one (R.A. 3591), as amended, and all laws, regulating insurance
companies: Provided, however, that nothing contained herein shall preclude
the AIB from the establishment of contemporary Islamic tafakul (solidarity
services) free of riba premiums or interests.

Section24. 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 25. Application of the Islamic Shari'ah. - The Monetary Board of the
BangkoSentral ng Pilipinas shall formulate the necessary rules and regulations to
carry out the provisions of this Charter for the purpose of providing adequate
credit facilities primarily to the Filipino-Muslims and supervise the operation of
the AIB in accordance with the universal principles of the Islamic Shari'ah.

Section 26. Penalties for Violation. - Any person who violates or permits the
violation of any provision of this Act shall be punished by a fine not exceeding
‘Two Hundred Thousand pesos (P200,000.00) or an imprisonment of not more
than five (5) years, or both at the discretion of the court.

Section 27. Reorganization of the Bank. - The AIB shall commence its
reorganization within six (6) months from the date this Act takes effect. The
present personnel complement of the Philippine Amanah Bank shall in the
interim continue to discharge their respective functions. Officials and personnel
whose services may be dispensed with as a result of this reorganization shall be
paid the usual gratuities to which they may be entitled.

Section 28. Supervision and Regulation by the BangkoSentral ng Pilipinas. - The
AIB shall be under the supervision and regulation of the BangkoSentral ng,
Pilipinas. All provisions of this Act, subject to applicability of Islamic Shari'ah
principles, shall be subject to all banking and pertinent laws of the Philippines
and BangkoSentral Rules and Regulations which shall include proper safeguards

12


to depositors and investors in the investments, partnerships, agencies and other
operation of the bank.

Section29.Privatization. -Nothing in this Act shall be construed as to preclude
the AIB from privatization.

In the event of privatization, the Bank shall be registered with the Securities and
Exchange Commission (“SEC”), and shall be subject to applicable provisions of
the Corporation Code of the Philippines, in addition to the rules and regulations
of the BSP and other government regulatory agencies. The AIB shall
automatically cease to exist upon its registration under the SEC.

Section 30.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 31. The 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,
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 SEC.

Section 32. Separability Clause. - If any of the provisions of this Act is declared
invalid, the other provisions not affected thereby shall remain in full force and
effect.

Section 33. Repealing Clause. - All laws, presidential decrees, executive orders,
rules and regulations, and other issuances, or any parts thereof, inconsistent with
this Act, are hereby repealed, modified, or amended accordingly.

Section 34. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) newspapers of general
circulation.

13


Approved,

14