Deadline looms for Islamic banking units

The Bangko Sentral ng Pilipinas (BSP) has proposed requiring Islamic banking units (IBUs) operated by conventional banks to either transition into full-fledged Islamic banks or comply with universal bank capital requirements within five years.

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Under a newly proposed circular, the central bank has set a five-year transitory period for conventional big banks, which refer to commercial banks or subsidiaries of universal or commercial banks, to meet capitalization standards if they maintain an Islamic banking unit.

After this period, these commercial banks must either convert the IBU into a stand-alone Islamic bank or ensure it complies with universal bank capital thresholds. This means banks will need to invest more money to continue offering Islamic banking services in the long run.