Islamic Financial Services Act 2013 comes into play - IFN

Islamic Financial Services Act 2013 comes into play

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MALAYSIA: A new regulatory framework for Malaysian banks and financial institutions, both conventional and Shariah compliant, has come into play under the Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA). The Acts, which were published in March this year, has taken full effect starting the 1st July. According to Bank Negara Malaysia, the Malaysian central bank, the FSA and IFSA is an amalgamation of separate laws previously governing the Malaysian financial sector, including the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Insurance Act 1996, Takaful Act 1984, Payment Systems Act 2003 and the Exchange and Control Act 1953; all of which have been repealed. However, there are some aspects from the repealed Acts which have been carried forward into the new Acts, including the need to obtain a written approval from the central bank for a property or liability to be insured with a non-Malaysian insurer which now applies to the Takaful sector, under section 127 of the FSA and section 139 of the IFSA. The central bank has also put a restriction on the use of specific words such as bank, insurance, and Takaful by businesses unless they have received the written consent of Bank Negara Malaysia, as to not contravene the new regulatory requirements. The new regulations aims to provide better focus on Shariah compliance and governance in the Islamic financial sector by providing a comprehensive legal framework which is consistent with Shariah in all aspects of regulation and supervision, from its initial set up and licensing to its winding-up. According to a statement by the central bank, the laws will provide Bank Negara Malaysia with the necessary regulatory and supervisory oversight powers to fulfil its broad mandate within a more complex and interconnected environment. “This includes an increased focus on preemptive measures to address issues of concern within financial institutions that may affect the interests of depositors and policyholders, and the effective and efficient functioning of financial intermediation,” it said.