. while it has been over four decades since the creation of the first islamic bank, islamic banking itself has not grown in large part because of legal constraints. the al - amanah charter created the bank but not a framework for islamic banking per se. no such enabling law has so far been passed. in fact, the general banking law of 2000 defines islamic bank as specifically pertaining to al - amanah bank only. the gbl does not provide for the creation of other islamic banks. if we are to create a truly responsive system of islamic banks, from a bsp standpoint, certain principles will be important. first, the system must allow for a critical mass of market players under a competitive but well regulated environment. the public must be provided with appropriate choices to suit their risk appetite and financial needs. second, appropriate linkages, including inter - bank markets that cater to the unique characteristics of islamic banking, must be present. third, the regulatory and supervisory framework must encourage a level playing field where the islamic banking system can operate alongside conventional banking. there must be a coherent, consistent and comprehensive set of regulations and standards that would appropriately apply to all banks. in other words, the privileges that are available for conventional banks must also be available to islamic banks. in the same vein, the prudential requirements that cover conventional banks, must also apply to islamic banks. the design and implementation of standards, of course, would need to take into account, the particular characteristics of islamic finance. fourth, the regulatory environment must encourage the provision of innovative products and services to address the distinctive needs of islamic finance. islamic financial players should be encouraged and not inhibited from introducing islamic finance products. the regulatory framework could consider the substance [ more than the form ] of the islamic products, assess the economic risks involved and use that assessment as basis for regulation. to support this approach, the system must allow for the development of a pool of experts on islamic finance. bis central bankers ’ speeches fifth, the regulatory framework must help build a broader customer and asset base by increasing investor awareness and acceptance, while ensuring consumer protection. while the bsp would like to promote an increase in the number of islamic banks that operate alongside conventional banks, the bsp is also looking at an “ open approach ” whereby conventional banks can operate islamic banking windows, if they so desire, as long as the principles outlined just now are followed. fortunately, there is growing literature on how these principles can be realized. we can learn from the research

and expertise of the islamic financial services board, of which the bsp is an associate member, other international organizations and friendly governments which have signified interest in supporting bsp in this initiative, as well as from the rich experiences of outstanding practitioners of islamic banking. to achieve all these objectives, the bsp intends to work towards attaining a suitable legal framework for islamic banking in the philippines. we are currently in the very early stages of drafting a general law for the creation and regulation of islamic banks. consistent with this, we have included in our list of proposed amendments to our charter, a provision that will enable the bsp to develop regulations for the extension of financial facilities to islamic banks. concluding thoughts ladies and gentlemen, there is much work for all of us to do. the task requires strong partnerships among key stakeholders in the government and the private sector and the support of key international organizations and friendly governments. today ’ s workshop is another important step for all of us to work together, share ideas and mobilize support toward promoting islamic banking and finance in the country. indeed, a well - crafted framework for an islamic banking and finance system would ensure that our goal of stretching the coverage of our financial system [ so it casts a wider net ] is attained. in addition, islamic finance with the vast opportunities it offers could potentially trigger inflows of foreign investments. investments, which in turn, could be deployed towards building the necessary infrastructure and other projects to accelerate and sustain economic growth. for certain, an appropriate islamic banking and finance framework would help ensure that the philippines ’ financial system would truly be a more effective catalyst of broad - based and inclusive growth. on that note, let me wish you a most productive workshop. thank you and good morning. bis central bankers ’ speeches