QuestionsQuestions (PRESIDENTIAL DECREE NO. 363)
RA 6848 is titled “The Charter of the Al-Amanah Islamic Investment Bank of the Philippines.” It provides the 1989 charter of the Bank, authorizes it to conduct Islamic banking business, and repeals PD No. 264 (as amended by PD No. 542) that created the Philippine Amanah Bank.
Its principal domicile and place of business is in Zamboanga City. It may establish branches, agencies, or other offices in the Philippines or abroad subject to Central Bank laws, rules, and regulations.
Its primary purpose is to promote and accelerate the socio-economic development of the Autonomous Region by performing banking, financing, and investment operations, and by establishing/participating in agricultural, commercial, and industrial ventures based on Islamic concepts of banking.
All business dealings/activities must be subject to the basic principles and rulings of Islamic Shari’a within the declared policy. Zakat/tithe paid on behalf of shareholders and depositors must be treated as part of the Bank’s compliance and disbursed in legitimate channels ascertained first by the Shari’a Advisory Council.
It has not more than five (5) members, selected from Islamic scholars and jurists of comparative law. Members are elected every three (3) years by the general shareholders meeting from nominees prepared by the Board. The Board selects the first Council and determines their remunerations.
It offers advice and undertakes reviews on applying Islamic Shari’a principles to the Bank’s transactions, but it does not directly involve itself in operations. A member may be invited to expound views in Board meetings but is not entitled to vote on the matters presented.
Examples include: (1) opening current/checking accounts; (2) opening savings accounts for safekeeping with no profit-loss participation; (3) accepting investment account placements for Islamic permissible transactions on participation basis; (4) buying/selling foreign exchange; (5) issuing letters of credit/letters of guarantee; (6) providing financing via leasing or cost-plus profit (murabaha) or similar Islamic modes; (7) acting as correspondent and collection agent (as allowed, excluding riba).
Authorized capital stock: P1,000,000,000 divided into ten million (10,000,000) par value shares of P100 each, nominative and indivisible, with subscription/ownership limited to those subscribing to Islamic banking concept. Share classifications: Series A (5,100,000 shares; P510,000,000) for present stockholders of Philippine Amanah Bank such as the National Government and designated financial entities; Series B (900,000 shares; P90,000,000) for Filipino individuals/institutions; Series C (4,000,000 shares; P400,000,000) for Filipino and foreign individuals/institutions/entities.
For disputes between/among shareholders arising from their relations as shareholders: the Board of Directors acts as arbitrator by majority decision, with due process observed. For disputes between the Bank and an investor/shareholder: a separate Board of Arbitration with three members is formed (two arbitrators chosen by each party and a casting/presiding arbitrator selected by mutual agreement; if selection fails within the period, the matter goes to the Shari’a Advisory Council to select the missing member). The decision is final and executory and is deposited with the Corporate Secretary and the SEC.
Key limits include: (1) aggregate credit facilities/liabilities of any customer must not exceed 15% of unimpaired capital and surplus; (2) investment portfolios for any single industry must not exceed 30% of the Bank’s investment capacity (as defined in the Act via Central Bank computation); (3) unsecured loans/credit accommodations without sufficient security are limited to P50,000 at any time per person/company; and (4) no credit facility may finance acquisition of shares beyond 50% of the appraised value of the shares at the time of grant.
The Bank may grant officer/employee loans only under the service scheme and in special circumstances up to six months remuneration, with terms set by the Bank, and it cannot grant advances/credit facilities to directors/officers/employees or their related persons for whom they are guarantors/obligors. It also prohibits granting credit facilities to entities where a director/auditor is a shareholder/partner/manager/agent/employee unless approved by the unanimous vote of at least two-thirds of the Board excluding the concerned director, with the action recorded and reported to the Central Bank. Violation results in automatic vacancy for the responsible director/officer/auditor and possible criminal prosecution with legal penalties.
The Bank can accept deposits for non-interest bearing placements: savings accounts, investment participation accounts, current accounts/other deposit liabilities. If a deposit is received without authorization to invest, it is treated as current and/or savings and can be withdrawn wholly or partly at any time. Authorized time deposits are pooled for allocation in portfolios or working capital for projects/general investments.
The Bank invests co-mingled deposits acting as agent/attorney for depositors/investors, ensuring liquidity subject to Central Bank reserve requirements, using mudarabah or other Shari’a-permitted joint investment forms. Depositors/investors are entitled to a portion of returns based on their balances and period of participation, with profits calculated on the same basis as capital funds invested as determined under Section 35.
At year-end, after expenses and remuneration of Board and Shari’a Council, the Board determines appropriations to reserves, investors, and shareholders. Joint investment profits require transferring an amount equal to 10% of profits to the Investment Risk Fund for losses exceeding total investment profits for the year; this deduction may be reduced if reserves reach specified levels, and may cease when reserves become double the authorized capital. Losses are deducted from total profits of the year and any excess over realized profits may be deducted from the Investment Risk Fund; if insufficient, a comprehensive assessment is done for estimated profit/loss for mudarabah-financed operations not yet finally settled. Profit sharing between Bank (as mudarib) and investors is based on general percentages published by the Board, with the Bank’s share after investor allocation and in proportion to its invested funds; zakat must be paid to the zakat fund based on shareholders’ capital/reserves and investors’ funds/profits, subject to instructions.
Tax exemption (Sec. 37): Islamic Bank assets, profits, distributions, and related contracts/documents/transactions are exempt from taxes under the National Internal Revenue Code for actual Islamic banking operation as certified by the Central Bank—100% for first five years; 75% for sixth to eighth years. Exemption applies only to taxes/fees/charges for which the Bank would otherwise be liable, not those payable by counterparties. Investment in profit-loss sharing schemes may be exempt from all taxes under the NIRC except income tax, and an investment tax allowance is permitted if the Bank pays zakat on investor capital/surplus reserves during the joint investment period. Customs duty exemption (Sec. 38): within the first five years, importations of machinery/equipment/calculators/computers and spare parts needed for operation are exempt, but cannot be disposed domestically unless duties are paid.
Selected acts/law provisions are not applicable to the Bank to the extent rendered inoperative: Central Bank Act and General Banking Act provisions concerning determination of bank interest rates, loans/discounts, and interest-bearing instruments, and inconsistent provisions of the General Auditing Act and insurance-related laws. Limitation: nothing impairs the Central Bank’s powers to supervise and regulate the Islamic Bank.
Legal existence is for 50 years from approval of the Act, renewable upon resolution of the general shareholders meeting called for that purpose.
Within 60 days from effectivity, the By-Laws must be adopted by affirmative vote in the general shareholders meeting representing a majority of subscribed capital stock entitled to vote (paid or unpaid), subject to certification by the Monetary Board under the General Banking Act. Certified By-Laws must be signed by shareholders who voted for them, kept in the Bank’s principal office for inspection, and a copy must be filed/registered with the SEC, duly certified and countersigned.