The Banking Regulation and Supervision Agency (BRSA) — also known as Bankacılık Duzenleme ve Denetleme Kurumu — is currently working on a draft law aimed at taking the Turkish Islamic banking landscape to the next level. MARC ROUSSOT brings you the exclusive.
Islamic banking — colloquially known as participation banking in Turkey — is about to be deeply reformed. One of the key measures encompassed in the BRSA’s Draft Islamic Finance Law is the setting up of a national Shariah board. The law will also introduce several ethical measures while tackling some key issues in terms of customer rights and personnel policies.
Despite the draft law being worked on by the regulator since May 2016, some details still need to be ironed out. For instance, it has yet to be decided under which authority the national Shariah board will be created. “One of the options we are studying is in establishing a new governmental body. But it is not certain, we are still working on that,” says Abdurrahman Cetin, the head of the BRSA’s Islamic banking department.
Even though no precise timeline has been decided, the law, which will take into account international best practices, IFSB and AAOIFI standards as well as the sector’s requirements, should be finalized and submitted to the parliament by the end of 2017. Upon receiving the approval from the BRSA’s chairman and prior to submission to the parliament, the document will also be made available to the public for comments and feedback.
This reform follows the 10th Development Plan of Turkey in which a specific program on enhancing Islamic finance was included. The program consists of 31 actions addressing the issue from various aspects such as perception, product development, governance and education, to name a few.
“The research conducted on the Turkish financial customers showed that they are sensitive toward getting financial services from institutions that are fully Shariah compliant. Therefore, the law will positively affect [the] Islamic finance sector by means of promoting [its] sectorial reputation,” explains Abdurrahman. The BRSA also believes that the law will be a good example for other countries that want to establish a sound legal infrastructure for Islamic finance.