The Central Bank of the Philippines issued a circular amending the prudential regulatory guidelines for Islamic Banks and Islamic Banking Units in the Manual of Regulations for Banks, spanning establishment requirements, licensing, reporting, and liquidity risk management. The changes include a phased approach to prudential reporting for new market entrants and bank-wide application of liquidity ratio requirements for Islamic banking units. On establishment, a full-fledged Islamic Bank must meet the minimum capitalization requirements applicable to a UB, while a conventional bank may operate an Islamic Banking Unit if it meets the capital requirements for its banking category. Only a bank authorized to operate as a full-fledged Islamic Bank may use the words “Islamic bank” in its business name, and Islamic Banks may take steps to list their shares on a duly registered stock exchange. For Islamic Banking Unit licensing, applicants must submit a corporate plan describing the organization and business model for delivering Islamic banking products and services, and the application is classified as a Type A license subject to applicable fees; new Islamic Banking Unit branches or branch-lite units are subject to branch establishment guidelines and processing fees, while operations within existing branches or branch-lite units require prior written notification at least ten banking days before opening. Approved authority to establish an Islamic Banking Unit is automatically revoked if operations do not commence within one year after the bank receives notice of Monetary Board approval. On reporting, Islamic Banks and conventional banks with Islamic Banking Units must use existing Financial Reporting Package templates alongside a Supplemental Financial Reporting Package Report for Islamic Banks and Islamic Banking Units, which is treated as a Category A-1 report and submitted to the Department of Supervisory Analytics on the Financial Reporting Package timeline; a three-year observation period from commencement of Islamic banking operations applies before full implementation of prudential reporting requirements. For liquidity risk management, Islamic Banks remain subject to the Liquidity Coverage Ratio and Net Stable Funding Ratio, while Islamic Banking Units are not required to submit separate Liquidity Coverage Ratio, Net Stable Funding Ratio, or Minimum Liquidity Ratio reports and must instead be consolidated into the conventional bank’s bank-wide submissions, with corresponding integration into governance, risk management, and oversight frameworks. The amended guidelines also clarify the treatment of sukuk as “debt instruments” for liquidity purposes, including eligibility as high-quality liquid assets where requirements are met, and specify consolidation limits for counting Islamic Banking Unit liquid assets and high-quality liquid assets in bank-wide Minimum Liquidity Ratio and Liquidity Coverage Ratio calculations. The circular takes effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation.

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