Professional Documents
Culture Documents
Regulatory issues
Mohamad Bakkar
17 MARCH 2008
PALAZZO MEZZANOTTE – BORSA ITALIANA
MILAN
Content of Presentation
• Introduction
• Regulatory Challenges
• Conclusions
2
Introduction
3
Notable Facts and Figures
• Islamic funds in global financial institutions
are approximated to a total of US$1.3
trillion
• Islamic banking assets worldwide are
ranging between US$200 billion and $400
billion
• Annual growth: 10%-20%
4
5
Current Situation in Italy
• Banking regulation does not allow banks to offer
Islamic banking services
• Tax regulation does not permit competitiveness
of Islamic banking services
6
Challenges in Italy
Regulatory
and
tax issues
Islamic Banking
understanding by Trained and skilled
clients Islamic Bankers
7
Islamic Banking Framework
• EU Regulation
8
EU Regulation
• Does EU Regulation on Financial Services
allow Islamic Finance?
• European “passport”
9
EU Regulation
• Do we need a new EU Regulation on
Islamic Finance?
• Harmonization
10
Islamic Banking Law
If ITALY does not have the tax and
regulatory framework to deal with the
basic products,
14
Shariah Advisory Board
Reviews and certifies the permissibility
of products offered by Islamic Bank
Ascertains that investments and projects
in which the Islamic Bank has
participated are Shariah compliant
Observes that the Islamic Bank is
managed in accordance with Islamic
principles
15
Tax barriers
16
Double stamp duty or registration tax
Office price
Islamic 1 =1.000.000 €
2 Bank
Client
7% 7%
VAT=20%
= 20.000€
17
Murabaha = Extra VAT ?
20% VAT on mark Cost price
Islamic 2 =100.000 €
up= 2.000 €
1 Bank
Seller
Client 4 3
Item VAT=20%
PB + mark-up =
= 20.000€
120.000 + 10.000
=130.000 €
SP
PC =
=
(SP +mark-up) + VAT on markup
Cost price + VAT
=
=
132 .000€
120.000 €
18
Central Bank
• Authorization of Islamic Banks
• No authorization for Islamic Windows
19
Shariah Supervisory Board
• an independent body of specialized jurists
(scholars) in Islamic commercial jurisprudence.
• the Board may include a member other than
scholars, who should be an expert in the field of
Islamic financial institutions
• the duties of the SSB are: directing, reviewing
and supervising the activities of the Islamic
financial institution in order to ensure that they
are in compliance with Islamic Shariah rules and
principles.
20
Shariah Supervisory Board
• Sole authoritative body to advise Central
Bank on Islamic Banking and Takaful
21
Dispute Resolution
• Jurisdiction
• Applicable law
22
Jurisdiction
The SSB of Central Bank will be referred to by
the court or arbitrator in disputes involving
Shariah issues in Islamic banking & finance
In the case of the arbitrator, the SSB’s resolution
“shall be binding” upon the arbitrator (obligatory)
In the case of the court, the SSB’s resolution
“shall be taken into consideration” by the court
(advisory)
23
Applicable law
• Clauses of contracts: reference to Shariah
principles & choice of law of the land
24
Conclusions
European Strategy to introduce Islamic
Finance to European customers
27
GRAZIE MILLE !
28
For further information kindly contact:
Mohamad Bakkar
Tel : +39.02.88891711
Fax : +39.02.88891777
www.petrucciassociati.it
mbakkar@petrucciassociati.it
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