ISLAMIC BANKING | Cesar Tordesillas, Malaysia

Islamic finance players want balanced regulatory framework

Leading industry players in Islamic finance are requesting a balanced regulation that does not impede its growth or allow for abuse.

CIMB Islamic Bank Bhd CEO Badlisyah Abdul Ghani says the Islamic finance industry needs a balanced regulation, adding that there is always fear for any industry to be over regulated

“We need regulation and the financial regulator must always strive for a balanced regulation so that it is not too rigid as to choke the industry or too slack, thus allowing for abuse,'' he tells StarBizWeek in an email reply.

The kind of regulation needed for Islamic finance for any jurisdictions will be the kind that is found in Malaysia but tweaked and adapted to the specifications of each jurisdictions, he notes.
Badlisyah said that it should not be too rigid as to choke the industry or too slack, thus allowing for abuse.’

Furthermore, he says financial regulators must not see the act of regulating Islamic finance as an act of regulating religion but merely regulating commercial transactions just like any other financial transactions.

Maybank Islamic Bhd CEO Muzaffar Hisham says currently there is the uncertainty surrounding the shift to an over regulation of the industry.

“I believe, where appropriate, there should still be proper adequate regulations based on the needs of the market but do, however, feel an open and free market economy mechanism is able to provide the required market discipline,'' he adds.

He says intervention by the regulators should take into account the overall long term impact of the efficiency of the market, adding that the potential uncertainties in the changes in Islamic finance regulations could impact the risk management of the industry in the long run.

HSBC Amanah Malaysia Bhd CEO Rafe Haneef, while agreeing that there should a balanced regulation in Islamic finance, says Bank Negara has done the right thing in setting up a comprehensive standard for regulating Islamic banking to ensure prudent banking even though some quarters feel that it is over regulated.

“Malaysia's Islamic fiance industry is one of the most comprehensive in the world in terms of regulatory framework and syariah governance framework. This is because the regulatory framework , among others, clearly spells out the responsibilities of the board, management and syariah committee, etc,” he adds

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