New de­vel­op­ments in in­ter­est-free bank­ing

Dünya Executive - - BUSINESS BY LAW - MUHSIN KESKIN, PART­NER ESIN AT­TOR­NEY PART­NER­SHIP [email protected]

On Septem­ber 14, the Bank­ing Reg­u­la­tory and Su­per­vi­sory Au­thor­ity (BRSA) pub­lished the Com­mu­niqué on Com­pli­ance with the Prin­ci­ples and Stan­dards of In­ter­est-Free Bank­ing.

What’s new?

The Com­mu­niqué reg­u­lates prin­ci­ples and pro­ce­dures for par­tic­i­pa­tion banks and de­vel­op­ment and in­vest­ment banks to en­sure their com­pli­ance with the prin­ci­ples and stan­dards of in­ter­est-free bank­ing.

Within this scope, these banks will es­tab­lish an ad­vi­sory com­mit­tee. The ad­vi­sory com­mit­tee will ren­der its de­ci­sions re­gard­ing the prin­ci­ples and stan­dards of in­ter­est-free bank­ing and their im­ple­men­ta­tion, as well as ex­am­ine banks’ com­pli­ance with these prin­ci­ples and stan­dards.

The ad­vi­sory com­mit­tee must its ren­der de­ci­sions in­de­pen­dently and free from the in­flu­ence of ex­ec­u­tives and other re­lated par­ties.

At least two-thirds of the mem­bers of this ad­vi­sory com­mit­tee must have (i) un­der­grad­u­ate de­grees in the­ol­ogy or sim­i­lar fields, or a grad­u­ate or PhD de­gree in in­ter­est-free fi­nance and (ii) at least three years’ work ex­pe­ri­ence in in­ter­est-free fi­nance.

Com­pli­ance ac­tiv­i­ties will en­able (i) prod­ucts and ser­vices pro­vided, agree­ments, in­vest­ments and trans­ac­tions un­der­taken; (ii) reg­u­la­tions within the bank, fi­nan­cial state­ments and ac­tiv­ity re­ports; and (iii) re­la­tion­ship with share­hold­ers and per­son­nel to be in com­pli­ance with the prin­ci­ples and stan­dards of in­ter­est-free bank­ing and the ad­vi­sory com­mit­tee’s res­o­lu­tions.

Com­pli­ance with in­ter­est-free bank­ing will be au­dited by banks’ in­ter­nal au­dit units, pro­vid­ing as­sur­ance to the bank’s ex­ec­u­tives, share­hold­ers and other stake­hold­ers in this re­spect.

Fur­ther­more, banks must in­form their clients, suf­fi­ciently and ef­fec­tively, about the prod­ucts and ser­vices, terms of agree­ments and rights and obli­ga­tions of the par­ties with re­spect to the prin­ci­ples and stan­dards of in­ter­est-free bank­ing.

Con­clu­sion

The tar­gets of the Is­tan­bul Fi­nan­cial Cen­ter pro­gram in­cluded turn­ing Turkey into a re­gional hub for in­ter­est-free fi­nance and one of the world’s cen­ters for in­ter­est-free bank­ing. The grow­ing de­mand for in­ter­est-free fi­nan­cial ser­vices paved the way for new reg­u­la­tions, such as the in­tro­duc­tion of taka­ful in­sur­ance. This Com­mu­niqué will de­ter­mine the gen­eral stan­dards ap­pli­ca­ble to all in­ter­est-free bank­ing ser­vices and en­sure mon­i­tor­ing of com­pli­ance with these stan­dards.

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