Rahn - Overview

Transcription

1. Rahn 1 of 27 PART A OVERVIEW 1 Introduction 1 .1 Compliance with Shariah requirements is a prerequisite in ensuring the legitimacy and integrity of Islamic financial products and services. In meeting this expectation, it is essential for an Islamic financial institution (IFI) to establish the necessary operational framework and infrastructure to ensure that its conduct of Islamic financial transactions is consistent with Shariah. 1.2 The Shariah contract-based regulatory policy is intended to promote consistency of Shariah contracts application in Islamic financial products and services. This policy is envisaged to strengthen legal certainty and Shariah compliance practices by an IFI. 1.3 This policy document aims to– (a) provide reference on the Shariah rulings applicable to a rahn (collateral) contract; (b) set out key operational requirements for the implementation of the rahn contract; and (c) promote end-to-end compliance with Shariah requirements which further promote sound Islamic banking and takaful practices and safeguard consumer interests. 1.4 This policy document sets out the following: (a) salient features and essential conditions of the rahn contract in Part B; and (b) regulatory and supervisory expectations for the operational requirements on governance and oversight, structuring, risk management, business and market conduct as well as financial disclosure in Part C. 2 Applicability 2.1 This policy document is applicable to all IFIs as defined in paragraph 5.2 that applies the rahn contract for its products and services1. 3 Legal provisions 3.1 The requirements in Part B of this policy document are specified pursuant to– (a) section 29(1) of the Islamic Financial Services Act 2013 (IFSA); and (b) section 33E(1) of the Development Financial Institutions Act 2002 (DFIA). 3.2 The requirements in Part C of this policy document are specified pursuant to– (a) sections 29(2), 57, 135(1) and 155 of the IFSA; and (b) section 33E(2), 41, 42C(1) and 116 of the DFIA. 1 For the avoidance of doubt, products and services do not include financing facilities offered to an IFI’s employees.
2. Rahn 2 of 27 3 .3 The guidance in this policy document is issued pursuant to section 277 of the IFSA and section 126 of the DFIA. 4 Effective date 4.1 This policy document comes into effect on 1 August 2019 except for paragraph 33 which takes effect immediately upon issuance of this policy document. 4.2 The Bank is committed to ensure that its policies remain relevant and continue to meet the intended objectives and outcome. Accordingly, the Bank will review this policy document within 5 years from the date of issuance or the Bank’s last review and, where necessary, amend or replace this policy document. 5 Interpretation 5.1 The terms and expressions used in this policy document shall have the same meanings assigned to them in the Financial Services Act 2013 (FSA), IFSA and DFIA, as the case may be, unless otherwise defined in this policy document. 5.2 For purposes of this policy document– “S” denotes a standard, an obligation, a requirement, specification, direction, condition and any interpretative, supplemental and transitional provisions that must be complied with. Non-compliance may result in enforcement action; “G” denotes guidance which may consist of statements or information intended to promote common understanding and advice or recommendations that are encouraged to be adopted; “direct cost” refers to costs that are directly related to the rahn transaction, either based on actual or estimated amount, without any profit or mark-up element; “Islamic financial institution” or “IFI” refers to– (a) licensed Islamic banks; (b) licensed takaful operators and professional retakaful operators; (c) licensed banks and licensed investment banks approved under section 15(1)(a) of the FSA to carry on Islamic banking business; and (d) prescribed institutions approved under section 33B(1) of the DFIA to carry on Islamic financial business; “obligor” means a person who has a liability or obligation owed to a pledgee; and “third party pledgor” refers to a third party who pledges either his asset or another party’s asset as collateral to fulfil the liability or obligation of an obligor owed to a pledgee.
3. Rahn 3 of 27 5 .3 A glossary of terms used in this policy document is set out in Appendix 2. 6 Related legal instruments and policy documents 6.1 This policy document must be read together with other relevant legal instruments, policy documents or guidelines that have been issued by the Bank, in particular– (a) Corporate Governance; and (b) Guidelines on Imposition of Fees and Charges on Financial Products and Services.