MINUTES OF THE ISLAMIC BANKING COMMITTEE MEETING

Transcription

1 22 November 2016 MINUTES OF THE ISLAMIC BANKING COMMITTEE MEETING Date: Monday, 21 November 2016 at 09:00 Venue: Banking Association Offices, Boardroom 4, Ground floor 1. Present and Apologies Present: R S Semnarayan (Chairperson) : Banking Association Cas Coovadia : Banking Association Nasima Sayeed-Mullah (Telecon) Uwaiz Jassat Abdullah Ameed (Telecon) : Albaraka Bank Shabir Chohan (Telecon) : Albaraka Bank Musa Zuma (Telecon) : Albaraka Bank Amman Muhammad Shaheen Suliman Jameel Nagdee : Investec Bank Apologies: Muhammad K Khurshid Muhammad Z Moola Ahmed Suliman Melinda Coetzer (Secretary) : Banking Association 2. Confirmation of Minutes of 28 July 2016 The Minutes of 28 July 2016 were confirmed. 3. Issuance of the Local Currency Sukuk The Chairperson confirmed that a letter was sent to NT in respect to the Local Currency Sukuk. BASA will ask NT if we can have a meeting to discuss this. 4. Impact of STT on Equity Trades for Islamic Financial Institutions: Albaraka Bank The Chairperson noted that the KPMG report was not yet received from Albaraka Bank to date. 5. Interaction with FSB and FSRB There was a request that BASA present to the conduct authority on Islamic Banking and its impact on conduct generally. The Chairperson updated the Committee on the status of the Twin Peaks Bill and BASA s general strategy with regard to the interaction with FSB/Conduct authority.

2 Page 2 On this issue the FSB requested BASA to have a discussion with the insurance and pension fund sectors. BASA spoke with SAIA and ASISA and there was no appetite from them to get involved in Islamic Banking. BASA need to go back to the FSB and indicate that we want to talk to them as the banking sector, so we need to get a mandate and decide how we are going to do that. According to one of the members, as far as insurance is concerned, Zurich is the only provider right now that is offering Islamic banking products and according to the member it is important for SAIA to get involved too. Mr Coovadia suggested that he has a meeting with these industry bodies namely ASISA and SAIA every 2 months on a CEO level, and he will raise this issue at their next meeting. The idea is to do this by February/March and to drive this on a CEO level and try to get the fund managers also involved. The suggestion was also made to involve the Shariah representatives in order to get the industry activated on this issue. On a question from Albaraka on how Cas wants to drive this initiative, Cas confirmed that he first wants to meet with the other 2 CEO to get them to agree that this issue be driven as a broader industry issue and once he gets both to agree to getting involved in Islamic Banking then one can work on the technical issues like setting up meetings with the various stakeholders and regulators, being the FSB and the SARB. The Chairperson noted that the purpose of this engagement would be to give the FSB a briefing of what Islamic Banking is so that they have this information when they are developing the conduct framework. It is important to note that BASA has a Conduct Work Group and the BASA position is that the Conduct Authority and all their regulatory intervention should be principled based. The Chairperson confirmed that Albaraka should do some background work on what BASA needs to present. One of the members suggested that since Albaraka is a standalone full Islamic bank, they can do a position paper from their side and then the other banks that only have an Islamic windows in the commercial banks, can also do a position paper. The Chairperson noted that banks have until the end of January 2017 to prepare this paper. The structure of the paper should be: Background of Islamic Banking How the banks would like to see the conduct framework unfold so that it is in alignment with Islamic Banking. One of the members also highlighted the following: Since commercial banks that only have Islamic windows are self-regulated through Shariah Advisory committees or Boards and the element of self-regulation that these commercial banks apply, that could be the basis for what we take back to Twin Peaks, because we need to share with them what needs to be regulated. It is therefore important to indicate to them what is the purpose of the Shariah Advisory Committees and the difference between an Islamic Window and a stand-alone Islamic bank. Mr Coovadia noted that from the discussion it appears that all the banks need to get on the same page on this issue and the document that Albaraka and the Islamic Window commercial banks are going to prepare needs also to serve as a basis just to ensure that the BASA Islamic Banking Committee is on the same page and to then to get SAIA and ASISA on the same page, so by the time the banking industry need to see the Market Conduct Authority, that all these parties are on the same page. Mr Coovadia noted that the starting point should

3 Page 3 be the current regulations. In other words what if anything needs to be done in current regulations to facilitate Islamic banking and if there are any gaps in that, then specific regulation needs to be addressed to address this, if necessary. We might have to take cognisance of anti-competitive issues. The Chairperson confirmed again that the position paper should reach her office by 31 January Then a Committee meeting will be scheduled for February 2017 to discuss the issues. In the meantime the Chairperson will liaise with the FSB for a meeting in February /March. 6. New/Latest developments globally and the reporting impact on SA Islamic Banks: FNB Islamic Banking One of the members stated that they raised this point because there are some interesting issues that are happening around IFRS. For a long time AAOIFI dictated the standard for the interpretation of IFRS3 accounting pronouncements for utilisation by Islamic Banks. In SA we follow IFRS, and apparently the IASB has now formally recognised Islamic Banking Transactions in the system. It is recommended that working through AAOIFI is preferred. IFRS has agreed to set up a subcommittee to look at accounting for Islamic Financial Institutions. Maybe it would be a good standing Agenda point going forward. Mr Coovadia noted that we should also leverage of the International Banking Federation and if BASA could identify 2 or 3 critical areas and through the federation actually ask the other banking associations how the deal with these issues. The Chairperson will follow-up on this. 7. Customer/Core Stakeholder Awareness FNB Islamic Banking This point will be addressed in point General Matters 8.1 KMPG report on the STT matter Albaraka Bank The Chairperson confirmed that BASA has not yet received the KPMG report and asked Albaraka bank to give a report back on this issue. The member confirmed that they request for permission from KPMG and that form will be forwarded to BASA for the Chairperson for signature. Once this is done, the document can be made available. This document refers to the engagement that Albaraka bank had with National Treasury explaining how interbanktransactions are being done. The Chairperson confirmed that the KPMG document will be circulated to the Islamic Banking Committee members and will then be discussed at the next meeting. If required, BASA will set up a meeting with NT for discussion. 8.2 Certain tax issues in respect to Murabaha definition The Chairperson confirmed that the Direct tax Committee had done a general submission on this issue and they specifically dealt with the Islamic Banking issue. The Chairperson noted that BASA is trying to create better alignment between ourselves and the Direct Tax Committee. Mr Coovadia also confirmed that should there be an issue, he should be notified in order to raise it with the Board Executive Members.

4 Page BASA Islamic Banking Committee meetings The Chairperson mentioned that usually the issue is raised with members of the committee on how to make this committee more effective and there is a cleanup of representative to this committee. An gets send to the principal of the committee and the principal then needs to inform BASA who should represent their bank on a specific committee. They give the indication of who should be a principal and who should be an alternate. The members expressed their need for having this Committee as a continuation with its quarterly meetings, since there are no other forum to discuss this Islamic Banking issues. Members expressed their appreciation for the fact that there are quarterly meetings however they feel that should the need arise, a meetings can be scheduled in between. Albaraka bank expressed their need to attend via video conferencing and also expressed the need that the committee should set out some goals that need to be achieved. Mr Coovadia confirmed that this Committee need some sort of work programme so that it is clear on the role that BASA plays and the issues that BASA need to coordinate on behalf of the industry. Islamic Banking is a relatively new field in SA. The industry must identify 3 or 4 critical issues we need to deal with particularly with the Regulator, because that is where BASA plays the best role. The Chairperson requested members for a work programme and suggest that BASA request some input on that and then it can discuss and finalise that at the next meeting. Mr Coovadia suggested that if BASA is aiming to meet at the end of February, it might be useful if Albaraka bank can also come down for that meeting and we get the insurance and pension fund manager people around the table for a face-to-face meeting and perhaps to set some time out for that on the basis of the work that has been done and work that still need to be done with everyone present and get some milestone and kick off the year in that way. Albaraka bank prefers a Monday for such a meeting. Mr Coovadia informed the Committee that he is going to be developing a set of protocols on what BASA is expecting of banks. Banking Association is not structured to instruct banks to do anything, but Cas want to get a set of protocols through the Board just to set some guidelines on what is expected of banks and how do we conduct ourselves amongst each other and what the role of individual banks are in order for us to be on the same page. This will be done at the first Board Exco meeting of 2017 and that will be fed through all the committees of BASA.

5 Page 5 There being no further business the Chairman closed the meeting. Confirmed: CHAIRMAN DATE