Pope Benedict XVI regrets

By: Abdel Aziz Dimapunong

Imam, Masjid Al Khairi

Alhamdulillah. Praise is to God-Alone who gives the temporal power of reason to whom He pleases, and for as long or short as He pleases. And peace is to Prophet Muhammad, his companions, friends and family. And peace to everyone on this occasion of Ramadhan 1427 A.H

Last September 12, 2006, Pope Benedict XVI delivered a lecture at Regensburg University where he was quoted to have said “offensive remarks about Islam and Muslims”. It was clear that the pope linked the religion of Islam to violence. The Muslims reacted faster than they did on the issue of Danish cartoons. It was immediately unleashed with fury. By Friday, September 15, 2006, Palestinians protestors marched in the Gaza Strip waving the flags of Hamas and chanting Allaho Akbar (Allah is Great) Their prime minister, Ismail Haniya criticized the pope's comments, saying: "These remarks go against the truth and touch the heart of our faith.”

The following day, thousands of Muslims have held demonstrations around the world. They protested against the remarks made by Pope Benedict about Islam and violence. Aljazeera reported that two churches in the West Bank city of Nablus were hit by firebombs. The targets were a Roman Catholic Church and an Anglican church. In Gaza City, four other firebombs exploded at a centre run by the city's oldest Christian church.

Five days after he made his remark, Pope Benedict XVI said he “sincerely regretted” that he may have offended the Muslim world. This partly calmed down the outrage of some Muslims although some still want more than being sorry. Among those that reacted positively were the Muslim Council of Britain, Britain’s Ramadhan Foundation, the British Muslim Initiative, and the Islamic Society of Britain.

In making his remark, Pope Benedict XVI wishes to set back the time to the Byzantine days of conflict. Nobody seems to understand why he quoted Emperor Manuel II Paleologus who was clearly anti-Islam. Why Joseph Ratzinger had to say those hurting words befuddled so many. I personally do not wonder. It is no surprise to me because the Holy Qur’an has the explanation. Why wonder so much? Benedict is already 79 years old in the Gregorian calendar. By reckoning of the Hijra Islamic calendar, Benedict is already about 82. He is already an octogenarian. In Islam, Muslims who live during and after the Prophet Muhammad, peace be on him, are told to expect a life expectancy of only 60 years. Any longer life maybe considered as a chance to live and believe. It is also of common knowledge that after the age of 60, a person’s intelligence and reasoning starts to decline. At the age of over 70, this decline may amount to simple forgetfulness or memory lapses. Reaching the age of 80 and above, amnesia or schizophrenia may set in. By the standard of Islam, 82 is an extremely old age. By Freudian theories, a person over 80 is susceptible to commit a Freudian slip.

The Holy Qur’an speaks of declining capacities of man including physical strength, intellectual and reasoning abilities. And this may be the relevant message for everyone. In the popular Sura Ya Siin is stated: “If we grant long life to any, we cause him to be reversed in nature. Will they not then understand?” (Qur’an: Verse 68: Surah 36). Seriously, I would like to call this as the verse of diminishing capacity of man. This verse is particularly relevant considering that Archbishop Dominique Mamberti, the Vatican foreign relations secretary, is insisting on an interfaith dialogue “based on sound intellectual foundation” and that he would like the dialogue to be so personal that “the thoughts of Pope Benedict XVI should be seen in that context”.

Yousef Ali, the famous translator of the meanings of the Qur’an had this comment on the verse of diminishing capacity:”As a child, the powers of mind and body are still undeveloped. As he grows, they grow, and certain moral qualities, such as courage, daring, the will to conquer, unfold themselves. In extreme old age these are again obscured, and a second childhood supervenes”. In the end man loses all of his memory – even his life.

Therefore, considering the age of the pope, we may just consider his remarks as a slip-up

According to Sigmund Freud, this condition results from the operation of unconscious wishes or conflicts and can reveal unconscious processes. Besides, the pope has already said he is sorry. He already expressed his “sincere regrets”.

There is another reason why we should let go the remarks of Pope Benedict XVI. Today is the start of Ramadhan fasting, although some will begin the fast tomorrow. My family and I are already fasting at this time of writing. This is a holy month when it is required of every Muslim not to be hostile to anyone. Yes, even when a Muslim is challenged to a fight, he should just say: “I am fasting”. And yes, even when he is challenge again, he should just say again: “I am fasting”.

As for me, I am fasting.

Abdel Aziz Dimapunong

Imam, Masjid Al Khairi

Manila, Philippines

Rejoinder on Islamic Bank in RP

By: Abdel Aziz Dimapunong Founding chairman, Amanah Islamic Bank

This is a rejoinder to a malicious posting on the website at www.islamicbank.com. The letter opinion was allegedly written by Vicente S. Aquino, director of the Office of Special Investigation of the Bangko Sentral ng Pilipinas. It was written six years ago but it is still appearing on the Internet in the said website. This could only mean that it is a smear campaign against my name.

Because I believe in the freedom of expression, I did not mind the letter response of the director of the BSP special investigation. As a journalist, it is my understanding that issues should be presented fairly. For this reason, I am presenting herewith my side of the issues.

The letter opinion was captioned “BSP on Islamic Bank in RP”. And it goes to saying that it was “in response to the letter-opinion of a certain Mr. Abdel Aziz Dimapunong, who claims to be chairman of Al Amanah Islamic Investment Bank of the Philippines. “ I am this same person, and it is true that I had an opinion letter that was published in the Opinion section of the Philippine Star on August 18, 2000. That was six years ago! This was also published by the Manila Bulletin on August 23, 2000. The Philippine Star and the Manila Bulletin are the two leading newspapers in the Philippines. They are also accessible through the Internet.

Since director Vicente Aquino was responding to my letter-opinion, I feel it is but fair to present also a copy of my letter-opinion. The following is a reprint of a six year old letter opinion that is being brought back to life by somebody in the Internet. It should really be considered as part of the history of the Islamic Bank. My published letter-opinion was captioned by the Manila Bulletin as “Islamic Bank clarifies ‘unfounded charges’, and entitled “BSP suit vs. bank clarified” by the Philippine Star. It was to the version of the Philippine Star that Mr. Aquino wrote a respond. A verbatim reprint of my opinion-letter as published by the Philippine Star follows

“In behalf of the thousands of shareholders of the Al Amanah Investment Bank of the Philippines, I would like to request your reputable newspaper to allow me to correct and update some of the information cited in the article of Marianne V. Go entitled “BSP files suits vs. ‘fake’ Islamic Bank Owners,’ published last August 7, 2000 in the Business Section of the Philippine STAR.

I know for a fact that your newspaper has always maintained its editorial objectivity and sense of fairness in all your dealings with the public and it is on this spirit that I enumerate the following facts to the readers of the Philippine Star to know both sides to the issues surrounding the Islamic Bank.

The article is correct in stating there is only one Islamic Bank in the Philippines and it is the Al Amanah Islamic Investment Bank of the Philippines which was created by Congress through RA 6848 and signed into law by President Corazon C. Aquino on January 26, 1990. That same law, in Section 52 abolishes the Philippine Amanah Bank which was created during Martial Law.

The existence and legality of the Al Amanah Islamic Investment Bank of the Philippines which I use to lead as its first Chairman and Chief Executive from 1992 to 1995 has been upheld by the Court of Appeals decision (CA-GR No. 28445-SP) dismissing the suit filed by Roberto de Ocampo, et. Al., questioning the legality of the Islamic Bank. A concurring decision on July 19, 1993 by the Supreme Court in Case UDK-11290 terminated with finality all legal actions questioning the implementation of RA 6848. The so-called Amanah Islamic Investment Bank of the Philippines which is supposed to be operating out of Pacific Star Building in Makati City is fiction created by the officials of the abolished Philippine Amanah Bank which has no assets, shareholders and banking operations having vacated its Pacific Star office since 1996.

As to the so-called BSP “suit”, a careful reading of the RA 6848 would show that our use of the word “bank” is organic to the charter granted by Congress for the Al Amanah Islamic Investment Bank of the Philippines to operate under Shariah law and exempting it from the usual regulations applicable to banks in this country. BSP cannot supersede an act of Congress and this is the heart of our counter-affidavit which we filed with the Department of Justice in response to the affidavit of complaint filed by two lowly staff members of Bangko Sentral which was the “suit” mentioned by the article.

For the information of your readers, the matter is only under preliminary investigation; no suit has been filed in court either by DOJ nor the BSP against Islamic Bank. Moreover, the Deputy Governor of BSP, Mr. Alberto Reyes, is not listed as party to the complaint, nor is the BSP an official complainant in the DOJ preliminary investigation. There is also no Monetary Board resolution supporting the filing of the said complaint which really makes us wonder about Mr. Reyes’ statements mentioned in the article. The actual affidavit of complaint was not against’ the group led by Abdul Gaffoor Ashroff’ but essentially about the Islamic Bank’s use of the word ‘Bank’ without BSP authorization which the Congress of the Philippines granted in RA 6848.

May I also correct the deception that Mr. Gaffoor or any single group owns the Islamic Bank. The Al Amanah Islamic Investment Bank of the Philippines has thousands of shareholders and Mr. Gaffoor is just one of them. It is our collective decision and recognition of Mr. Gaffoor’s commitment and vision for the people of Mindanao that made possible his election and induction as President of the Islamic Bank in our general shareholders meeting last August 04, 2000 at the Intercontinental Hotel, Ayala Avenue, Makati City. The Al Amanah Islamic Investment Bank of the Philippines has laid out in that meeting its plans and programs to uplift the livelihood and economic plight of our Muslim and Christian communities in Mindanao and other parts of the country. We have the resolve and resources to back up that mission to bring prosperity and with it real peace in Mindanao.

Our best wishes to your highly credible and outstanding newspaper.

(Sgd) Abdel Aziz Dimapunong

Issues about Amanah Islamic Bank

By Abdel Aziz Dimapunong
Chancellor, Islamic Banking Research Institute
Founding Chairman and Chief Executive Officer, Amanah Islamic Bank

In the Philippines, there are three legal issues about the Islamic Bank that are still being debated on. These controversies have been investigated by the Department of Justice upon an alleged complaint of the Monetary Board. The complaint, however, was not actually initiated by any member of this Board. The low ranking lawyers of the Bangko Sentral who filed the case had to admit in the course of investigation that they were actually acting on their own private capacities – and not on behalf of the Monetary Board. The case was filed in 1999. Until this date the complainants failed to secure the Resolution of the BSP Monetary Board authorizing the filing of a case in its own name. In the absence of the required Resolution, the lawyers who filed the case are said to be misrepresenting the Monetary Board. It has been almost seven years and the case is unsettled. In fact, the source of the complaint, Farouk Carpizo died some years ago. The once Deputy Governor of the Bangko Sentral who initiated the malicious complaint is no longer with the Bangko Sentral

In the meanwhile, malicious publicity about the case is still on the Internet. It is for this reason that the Islamic Banking Research Institute has been requested to shed light on the lingering controversy. The Institute is the only private entity that is held to be the most authoritative source of information about Islamic banking in the Philippines.

The issues are as follows:

1) Whether or not the Al Amanah Islamic Investment Bank of the Philippines needs a license to be issued by the Monetary Board.

The unauthorized Bangko Sentral lawyers charged the officers of the original Islamic Bank for not having been granted a license by the Monetary Board. The Islamic bankers maintained that they do not need a license from the Monetary Board.

2) Whether or not the Monetary Board has the prerogative not to recognize the legitimacy of the Islamic Bank

The unauthorized lawyers claimed that the original Islamic Bank is not recognized by the Bangko Sentral Ng Pilipinas. The officers of the original Islamic Bank maintain that the Bangko Sentral Ng Pilipinas has no choice but to recognize the Islamic Bank.

3) Whether or not the Monetary Board has the power to qualify or disqualify directors of the Islamic Bank.

The unauthorized lawyers claimed that the officers of the original Islamic Bank have not been qualified by the Monetary Board. The officers of the original Islamic Bank asseverate that they do not have to pass through the Monetary Board concerning the elections of directors of the Islamic Bank

All of the foregoing issues are discussed below. They are argued upon not in the legalese format of the justices of the Supreme Court but only in layman’s terms. They are presented just in the way of a blogger in Cyberspace. After all, the case that was allegedly filed by the Monetary Board in 1999 was not authorized by the Monetary Board. The case was not acted upon by any Court of law. The case is buried in what the law profession calls ‘archive’. It seems that nobody wants to stand for the malicious complaints. It is already about seven years since then. And even for any reason, the malicious complaint breaks into any honorable court, and the founders of the Islamic Bank welcome it in that unlikely event.

After our research and review, we asseverate as follows:

1) The Al Amanah Islamic Investment Bank of the Philippines does not need a license to be issued by the Monetary Board of the Bangko Sentral Ng Pilipinas in order to operate as a bank.

2) The Monetary Board has no prerogative to disregard the legitimacy of the Islamic Bank

3) The Monetary Board has no power to pass upon judgment on the qualifications and or disqualifications of directors of the Islamic Bank.

DISCUSSION

Undoubtedly, the Monetary Board has authority to regulate and supervise the Islamic Bank. This mandate, however, is subject to certain legal limitations. These restrictions are set by laws and jurisprudence. Some limitations are very much obvious even to laymen.

Obviously, the Monetary Board has no power to, revise, modify or reject any provisions of law such as those provided in the charter of the Islamic Bank. Obviously, it is rather wrong for any officers of the Bangko Sentral, including the Monetary Board to require the Islamic Bank an authority to operate as Islamic Bank. The charter of the Islamic Bank, RA 6848, already authorized it to operate as Islamic bank. The charter is very clear. It provides:

“SEC. 50. Statutory Articles of Incorporation. - This Act, upon its effectivity, shall be deemed accepted for all legal intent and purposes as the Statutory Articles of Incorporation of the Al Amanah Islamic Investment Bank of the Philippines; and that notwithstanding the provision of any existing law to the contrary, said Islamic Bank shall be deemed registered and duly authorized to do business and operate as an Islamic Bank as of the date of approval of this Act.” [Emphasis mine]

Another limitation of the powers of the Monetary Board is the fact that it has no legislative authority. It has no power of prosecution. The Supreme Court of the Philippines had already defined certain forbidden grounds in the case of Reformina vs. Tonol, Jr., L-59096, Oct. 11, 1985. In this case, the Supreme Court rules: “The Monetary Board may not tread on forbidden grounds. It cannot rewrite other laws. That function is vested solely with the legislative authority. It is axiomatic in legal hermeneutics that statutes should be construed as a whole and not as a series of disconnected articles and phrases. In the absence of a clear contrary intention, words and phrases in statutes should not be interpreted in violation from one another, xxx”

The Monetary Board has no authority to rule on matters of intra-corporate controversy among shareholders and investors of the Islamic Bank (Such as the case of Dimapunong Group vs. Carpizo Group). Matters of intra-corporate controversies are already assigned by law to the Board of Arbitration of the Islamic Bank. Arbitration is clearly stated in the charter and even in the Rules and Regulation of the Bangko Sentral Ng Pilipinas. It does not appear from the new Central Bank Act, the new General Banking Law of 2000, and other banking laws in the Philippines that the Monetary Board has the authority to proclaim who among contending directors are legitimate and who are bogus. If the controversy does not fall within the jurisdiction of the Board of Arbitration, then it should be under the regular courts pursuant to the Securities and Regulation Code, RA 8799.

Is also does not appear from the new Central Bank Act and the new GBL of 2000 that the Monetary Board is part of the judicial branch of government. It has also no power of a fiscal under Philippine jurisprudence. In the words of the Hon. Supreme Court of the Philippines: “The Central Bank is a government corporation created principally to administer the monetary and banking system of the Republic, not a prosecution agency like the fiscal’s office. Being an artificial person, the Central Bank is limited to its statutory powers and the nearest power to which prosecution of violators of banking laws maybe attributed is its power to sue and be sued. But this corporate power of litigation evidently refers to civil cases only.” (Damaso P. Perez vs. the Monetary Board, G.R. No. L-23307, June 1967)

In relation to the Islamic Bank, the limited supervisory power of the Monetary Board is tokenized by Republic Act 6848. This was so because the authority and influence of the Monetary Board are limited only to its jurisdiction in the Philippines. On the other hand, the Islamic Bank was conceptualized to be an international bank. Its charter provides for Series “C” shares for foreign investors, equivalent to forty (40%) percent of its authorized capital stock (Sec. 8, RA 6848).

To assure foreign investors, the charter provides “protection against nationalization, sequestrations, or expropriation proceedings”. Thus section 10 of the charter provides: “… the provisions of the Investment Code on the basic rights and guarantees of investors are made applicable to the commercial operations of the Islamic Bank in respect to repatriation or remittance of profits from investments, and to protection against nationalization, sequestrations, or expropriation proceedings. Any proceedings of judicial or administrative seizure may not be taken against the said property or investment except upon a final court judgment.” Section 10 of the charter is restated in the BSP Implementing Rules and Regulations under section 11.

For more attraction to foreign investors, the charter also provides that the board of directors of the Islamic Bank may sit as a board of arbitration. This provision is also found in the BSP Rules and Regulations These provisions on arbitration also offer an international appeal to foreign stockholders and investors. This is because, as early as the 1950’s, foreign arbitration as a system of settling commercial disputes was recognized when the Philippines adhered to the United Nations” Convention on the Recognition and the Enforcement of foreign Arbitral Awards of 1958” under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a state. [Cited by the Supreme Court in the case of Del Monte Corporation-USA, vs. Court of Appeals, Judge Bienvenido L. Reyes, et al. (G.R. No. 136154, February 7, 2001)

Clearly, the Islamic Bank was intended to be the Philippines’ entry to the world of global banking. This is why the charter provides the Islamic Bank with so much legal leverage. The Islamic Bank is not just a bank in the ordinary sense. Aside from a bank pursuant to its charter, it is also an Investment House pursuant to PD 129, and it is also a Venture Capital Corporation pursuant to PD 1688 (Section 17, RA 6848). Should it operate as a venture capital corporation, the Islamic Bank would be under the supervision of the Securities and Exchange Commission – rather than the BSP.

The Islamic Bank is even allowed by its charter to deal with governments of other nations. The law provides under Sec, 11 that “… Under special circumstances in which the Board of Directors considers it advisable to promote or facilitate Islamic banking business and commercial operations, the Islamic Bank may seek financing from governments, organizations, individuals or banks…” This mandate of the charter is also restated under Section 12 of the BSP Rules and Regulations. Stated in other words, the Islamic Bank may seek financial assistance from sovereign countries, including the so-called “super powers”. The Islamic Bank may seek financial assistance from the governments of the United States, Canada, Australia, United Kingdom, Japan, Saudi Arabia, and others. There is no limit under the charter. For this purpose, therefore, the Islamic Bank may have its representatives to any of these countries, subject to their respective laws.

The Islamic Bank is a chartered bank. This means that its Articles of Incorporation is not a mere agreement among corporators and incorporators. It means that the charter is a law, i.e. RA 6848. In the Philippines, there are only two banks with charters of their own. These are: 1) the Bangko Sentral Ng Pilipinas that is chartered by the New Central Bank Act, RA 7653, and 2) the Al Amanah Islamic Investment Bank of the Philippines that is chartered by RA 6848. Like other legislative acts, charters have the full force of the law. Violation of the Central Bank Act is a violation of law. In like manner, violation of the charter of the Islamic Bank is a violation of law. No one is exempted from the law, not even the governor of the Bangko Sentral.

The Islamic Bank charter shall remain to be a law even now that the Islamic Bank has been privatized. This is an explicit official opinion of the Secretary of Justice in the Philippines [Opinion No. 42, Opinion of the Secretary of Justice 2001. Confirmation that RA No. 6848, the Charter of Al-Amanah Islamic Investment Bank of the Philippines (Islamic Bank), remains in effect if the bank is privatized, unless said law is repealed by Congress.] This is another guarantee to the stockholders, domestic and foreign investors.

That the Islamic Bank, as part of the banking and financial system, should have international features is reiterated in the new GBL 2000 when it provides and declares, as a matter of policy, that the state shall promote this system to be “globally competitive.”

Indeed, even the mandate of the Monetary Board to formulate the rules and regulations was envisioned by Congress to be of an international character, regulation being the basis of supervision. Thus, the law provides: “The Monetary Board of the Central Bank of the Philippines shall formulate the necessary rules and regulations to carry out the provisions of this Charter… and to supervise the operation of the Islamic Bank in accordance with the universal principle of the Islamic Shari'a. (Sec. 43, RA 6848)

The Islamic Bank is also mandated to employ foreign experts, agents and representatives. SEC. 40 provides that “the Islamic Bank may employ foreign nationals in supervisory, technical or advisory positions for a period not extending five (5) years, extendible for limited periods upon the recommendation of the Governor of the Central Bank.

While the Monetary Board has the power to regulate (i.e. promulgate rules and regulation) and supervise (i.e. monitor) the Islamic Bank, The charter, makes it very clear that not all of the provisions of the Central Bank Act (now the New Central Bank Act) and the General Banking Act (now the New General Banking Law) are applicable to the Islamic Bank. That is one of the legal mechanics of tokenism. In reality, only provisions of special laws are applicable to the Islamic Bank (Sec. 71, new GBL 2000).

There is one more issue that is building up. Why would not anyone touch the case? Is it a Pandora’s Box?

This article entitled “Issues in the Islamic Bank” Sept.2000 Ed., by Abdel Aziz Dimapunong, is a property of the Islamic Banking Research Institute. 2006 All rights reserved.

The Islamic Bank as Investment House

By: Abdel Aziz Dimapunong
Chancellor, Islamic Banking Research Institute

Foreword

On these pages are copies of the following governing laws on the Islamic Bank as an Investment House:

(1) Presidential Decree No. 129, otherwise known as the Investment Houses Law, Approved: February 15, 1973.

(2) Batas Pambansa Bilang 66, An Act amending Presidential Decree No. 129, as amended. Approved: April 1, 1980

(3) Presidential Decree No. 1797, An Act further amending Presidential Decree No. 129, as amended, otherwise known as Presidential Decree No. 129, as amended. Approved: January 16, 1981

These laws are vital in conducting due diligence about the Islamic Bank. They provide the legal basis of certain acts of the chairman and the board of directors during the entire history of the Islamic Bank. Moreover, the Islamic Bank is more of an Investment House rather than a commercial bank.

Batas Pambansa Bilang 66 prohibits any person to be a director in any bank while being a director of an Investment House at the same time. This was the basis of the disqualification of directors of the Development Bank of the Philippines who were directors of the Philippine Amanah Bank at the same time. In the case of the Philippine Amanah Bank, it used to be that the chairman of the Development Bank of the Philippines sits as concurrent director and chairman of the Philippine Amanah Bank. This practice had no basis in law. It also had no basis in professional management. The only obvious reason for the directors of the Development Bank of the Philippines to sit concurrently as directors of the Philippine Amanah Bank was for them to receive more allowances and fringe benefits. To some professional Muslims, this practice was an affront because it seems to show that the Muslims can not run the management of a bank.

The prohibitions in Batas Pambansa Bilang 66 are echoed in Executive Order No. 81, otherwise known as the charter of the Development Bank of the Philippines. Section 5, E.O. 81 provides:

“Except for the chairman and the vice chairman of the Board, no officer or employee of the Bank (DBP) maybe appointed as a member of the Board of Directors of the Bank: nor shall any director, officer, or employee of any other bank be eligible as a member of the Board of Directors of the Bank. (Emphasis mine)”

When I was designated by the Office of the President of the Philippines to organize the Islamic Bank, I saw to it that the practice of concurrent directorship will not happen again. Aware of the prohibitions of Presidential Decree No. 129, as amended, and the prohibition under Executive Order No. 81, we disqualified the then chairman of the Development Bank of the Philippines, Mr. Roberto De Ocampo, to be elected as concurrent director of the Islamic Bank in the organizational election on April 28, 1992.

In order to set the precedence so that never again will the DBP lord over the Islamic Bank I filed a formal complaint on June 18, 1992 in the Office of the Ombudsman against Roberto De Ocampo. My complaint was against De Ocampo’s violation of law for having held concurrent directorship of the Development Bank of the Philippines and the Philippine Amanah Bank. The case was officially docketed as OMB-0-92-1279. This legal action was a follow up to my earlier complaint against De Ocampo earlier filed in Office of the Ombudsman. It was docketed as Case No. OMB-92-1278. This other complain concerns his attempt to be elected as concurrent director of the new Amanah Islamic Bank by means of a spurious stockholders meeting. Another case was officially filed on August 24, 1992, docketed as Case No. OMB-0-92-1706, against the same person and Ernesto Duran on the same issue but on the basis of another law, the provisions of RA 6848.

The cases I filed were not resolved until several years. Since then, no director of the Development Bank of the Philippines and other government banks dares to be elected as concurrent director of the Amanah Islamic Bank. The corporate tyranny of the DBP and the PNB over a bank for Muslims is gone. And we are on our own. This is something that the Muslims in the Philippines and elsewhere should be aware about.

Abdel Aziz Dimapunong

Manila, September, 5, 2006

x-------------x

Introduction

The charter of the Islamic Bank provides that it is authorized to source for funds from governments, banks, organizations or other entities and individuals from within the Philippines or abroad. These funds are classified into commercial and investment accounts. Commercial accounts are those derived from deposits received by the Islamic Bank without authorization to invest. These accounts are to be treated as current accounts and savings accounts. They may be withdrawn by depositors wholly or partly at any time. The funders are referred to as mere depositors. They are not investors.

On the other hand, investments accounts are those funds that are sourced and received by the Islamic Bank with authorization to invest for a given period of time. They constitute the general pool of placements allocated for the investment portfolios of the Islamic Bank: The funders are referred to as investors. They are actually partners of the Islamic Bank. They are not depositors.

In the matter of investing funds from pooled resources, the Islamic Bank is acting in the capacity of an agent or attorney.

Under the charter, the Islamic Bank may allocate part of its own investible funds to finance investment projects and carry on its Islamic banking business directly or indirectly under its own supervision. For this purpose, it is authorized to develop, establish and finance investment companies or affiliates, which shall manage investment projects on behalf of and under the supervision of the Islamic Bank and for its own account.

In the tradition of Investment houses here and abroad, the main players in the business of investment banking are referred to as start-up companies.

The Islamic Bank ascertains the viability and soundness of investment projects by start-up companies. They may be projects which the bank may directly supervise or they may be projects in which the bank may participate with the general pool of investor's funds with authorization. The Islamic Bank supervises these projects.

The authority to operate as Investment House is provided under Section 17 of the charter of the Islamic Bank. Section 17 specifies that the authority of the Islamic Bank as an Investment House shall be “pursuant to Presidential Decree No. 129, as amended” By virtue of this authority, the Islamic Bank may carry on the following:

(1) The Islamic Bank may have a direct interest as a shareholder, partner, owner or any other capacity in any commercial, industrial, agricultural, real estate or development project under mudarabah form of partnership or musharaka joint venture agreement or by decreasing participation, or otherwise invest under any of the various contemporary Islamic financing techniques or modes of investment for profit sharing

(2) The Islamic Bank may carry on commercial operations for the purpose of realizing its investment banking objectives by establishing enterprises or financing existing enterprises, or otherwise by participating in any way with other companies, institution or banks performing activities similar to its own or which may help accomplish its objectives in the Philippines or abroad, under any of the contemporary Islamic financing techniques or modes of investment for profit sharing; and

(3) The Islamic Bank may perform all business ventures and transactions as may be necessary to carry out the objectives of its charter within the framework of the Islamic Bank’s financial capabilities and technical considerations prescribed by law and convention: Provided that these shall not involve any riba or other activities prohibited by the Islamic Shari’a principles.

Whenever the Islamic Bank operates as an Investment House and or as a Venture Capital Corporation, it is under the control and supervision of the Securities and Exchange Commission - rather than the Bangko Sentral.

The provisions of the charter in relation to the authority of the Islamic Bank to operate as an Investment House are echoed verbatim in the Rules and Regulations promulgated by the Bangko Sentral Ng Pilipinas for the Islamic Bank.

On October 21, 1997, PD 129 was amended by Republic Act No. 8366, otherwise known as An Act Liberalizing the Philippine Investment House Industry, amending certain sections of Presidential Decree 129, as amended, otherwise known as the Investment House Law. Under Republic Act No. 8366, it was declared a matter of government policy “to expand and strengthen the capital base of the economy in order to ensure sustained economic growth and development". "Toward this end', this law state, "the Philippine investment house industry is hereby liberalized, increasing foreign equity participation..."

Under Section 2 of RA 8366, Section 5 of PD 129, was amended to read as follows:

"Sec. 5. Citizenship requirements. - At lease forty percent (40%) of the voting stock of any Investment House shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in Investment Houses, the basis for the computation shall be the citizenship of each stockholders, and, if the stockholder is a corporation, the citizenship of the individual stockholders holding voting shares in that corporation."

Foreign nationals may now become members of the board of directors of an Investment House such as the Islamic Bank to the extent of their equity participation. This would be consistent with Section 38 of the charter which is aimed at achieving the international and domestic objectives of Islamic banking business”.

PRESIDENTIAL DECREE No. 129

GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF INVESTMENT HOUSES

WHEREAS, there were pending before Congress, prior to the promulgation of Proclamation No. 1081, dated September 21, 1972, urgent measures proposing the regulation of the so-called investment banks;

WHEREAS, an extensive survey and study of the Philippine financial system had been undertaken in order to determine its adequacy in Philippine economic development, and an integrated set of recommendations were submitted;

WHEREAS, the recommendations, as endorsed with modifications by the monetary authorities and made the basis of this Decree, advocated the enactment of the statutory framework within which the underwriting of securities may be governed and, to the extent that these entities perform quasi-banking functions, to harmonize their operations with national monetary goals.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated September 22, 197, as amended, and in order to effect the desired changes and reforms in the social, economic, and political structure of our society, do hereby order and decree and make part of the law of the land the following:

Section 1. Title. This Decree shall be known as "The Investment Houses Law".

Section 2. Scope. Any enterprise which engages in the underwriting of securities of other corporations shall be considered an "Investment House" and shall be subject to the provisions of this Decree and of other pertinent laws.

Nothing in this Decree shall be understood to preclude other enterprises from engaging in the mere buying and selling of short-term securities of other persons or enterprises.

Section 3. Definitions. For the purpose of this Decree, unless the context otherwise indicates, the following definition of terms are hereby adopted:

(a) "Underwriting" is the act or process of guaranteeing the distribution and sale of securities of any kind issued by another corporation.

(b) "Securities" are written evidences of ownership, interest, or participation, in an enterprise, or written evidences of indebtedness of a person or enterprise. It includes, but is not limited to the instruments enumerated in Section 2 of the Securities Act (Commonwealth Act No. 83, as amended).

Section 4. Organization and registration. Investment Houses shall be organized in the form of stock corporations.

The Securities and Exchange Commission shall not register the articles of incorporation of any Investment House, or any amendment thereto, unless it is satisfied from the evidence submitted to it:

(a) That all the requirements of this Decree and of existing laws or regulations to engage in the business have been complied with;

(b) That the proposed enterprise will not be in conflict with public interest and economic growth;

(c) That the amount of capital, the proposed organization, direction and administration, as well as the integrity, experience and expertise of the organizers and the proposed managerial staff, provide reasonable assurance that the enterprise will be conducted with financial prudence.

In determining compliance with the provisions of subsections (b) and (c) above, the Securities and Exchange Commission shall consult the Monetary Board of the Central Bank of the Philippines.

All applications for registration of the articles of incorporation of Investment Houses shall be accompanied by:

1. At least three copies of the proposed articles of incorporation; lawphi1.net

2. A statement under oath of the educational background and experience of the organizers, directors, and the proposed managerial staff, as well as in information on any position concurrently held by them in other financial or banking institutions, if any;

3. A projected statement of assets and liabilities of the proposed Investment House;

4. A tentative program of operation for one year, including its investment direction and volume; and

5. Such other information as the Securities and Exchange Commission may require in support of the application and to enable the Commission to determine the justifiability of establishing the proposed enterprise.

Any enterprise already in operation and exercising the powers of an Investment House prior to the effectivity of this Decree shall, within six months therefrom, file an information sheet with the Securities and Exchange Commission in such form and containing such data as the Securities and Exchange Commission may, at its discretion, require, to enable the Commission to determine, in consultation with the Monetary Board, whether the enterprise meets the requirements of this Decree.

Section 5. Citizenship requirements. The majority of the voting stock of any Investment House shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in Investment Houses, the basis for the computation shall be the citizenship of each stockholder, and, with respect to corporate owners of voting stock, the citizenship of the individual owners of voting stock in the corporation holding shares in that Investment House.

The majority of the members of the Board shall be citizens of the Philippines.

Section 6. Prohibitions. Except as may be authorized by the Monetary Board, no director or officer of an Investment House shall concurrently be a director or officer of a bank, as defined in Section 2 of the Republic Act No. 337, as amended: Provided, however, That in no event can a person be authorized to be concurrently an officer of an Investment House and of a bank.

No Investment House shall engage in banking operations as defined in Section 2 of Republic Act No. 337, as amended.

Section 7. Powers. In addition to the powers granted to corporations in general, an Investment House is authorized to do the following:

1. Arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

2. Participate in a syndicate undertaking to purchase and sell, distribute or arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

3. Arrange to distribute or participate in a syndicate undertaking to purchase and sell on a best-efforts basis securities of other corporations and of the Government or its instrumentalities;

4. Participate as soliciting dealer or selling group member in tender offers, block sales, or exchange offering or securities; deal in options, rights or warrants relating to securities and such other powers which a dealer may exercise under the Securities Act (Act No. 83, as amended);

5. Promote, sponsor, or otherwise assist and implement ventures, projects and programs that contribute to the economy's development;

6. Act as financial consultant, investment adviser, or broker;

7. Act as portfolio manager, and/or financial agent, but not as trustee of a trust fund or trust property as provided for in Chapter VII of Republic Act No. 337, as amended;

8. Encourage companies to go public, and initiate and/or promote, whenever warranted, the formation, merger, consolidation, reorganization, or recapitalization of productive enterprises, by providing assistance or participation in the form of debt or equity financing or through the extension of financial or technical advice or service;

9. Undertake or contract for researches, studies and surveys on such matters as business and economic conditions of various countries, the structure of financial markets, the institutional arrangements for mobilizing investments;

10. Acquire, own, hold, lease or obtain an interest in real and/or personal property as may be necessary or appropriate to carry on its objectives and purposes;

11. Design pension, profit-sharing and other employee benefits plans; and

12. Such other activities or business ventures as are directly or indirectly related to the dealing in securities and other commercial papers, unless otherwise governed or prohibited by special laws, in which case the special law shall apply.

Nothing in this section shall preclude other enterprises not covered by this Decree from engaging in the activities listed under subsections (3) to (11) of this section, except as may otherwise be governed by special laws.

Section 8. Capital. The minimum initial paid-in-capital of any Investment House shall be twenty million (P20, 000,000) pesos.

Section 9. Credit policies. Investment Houses shall coordinate their credit policies with the general credit policies of the Monetary Board of the Central Bank.

Section 10. Reports. Investment Houses shall submit to the Securities and Exchange Commission and to the Central Bank a semi-annual report of operations and financial condition, signed under oath by its chief accountant and verified by its president.

The Securities and Exchange Commission may, at its discretion, require Investment Houses to include their underwriting commitments as contingent accounts in their financial statements.

Section 11. Regulations. Within six months after the approval of this Decree, the Securities and Exchange Commission, in coordination with the Central Bank, shall promulgate the necessary rules and regulations implementing the provisions of this Decree.

Section 12. Central Bank regulatory powers. Investment Houses shall be subject to such regulations of the Central Bank or non-bank financial intermediaries as may be promulgated pursuant to Section 2-B of Republic Act No. 337, as amended. The regulations which may include, but need not be limited to (a) minimum size of fund acceptance or receipt, (b) methods of marketing and distribution, (c) terms of placement and maturities, and (d) uses of funds may be modified by the Monetary Board insofar as they apply to Investment Houses.

The Monetary Board may, at its discretion, determine whether Investment Houses may be permitted to perform quasi- banking functions as defined in Section 2-D, subsection (b) of Republic Act No. 337, as amended. The Monetary Board is hereby authorized, at its discretion, to require any enterprise which is engaged or proposes to engage in quasi-banking functions to incorporate as an Investment House. If the Monetary Board decides to permit Investment Houses to engage in quasi-banking functions, the Board may require as a condition precedent the obtaining of a certificate of authority for the purpose from the Monetary Board.

Whenever the Monetary Board authorizes an Investment House to engage in quasi-banking functions, in accordance with the provisions of this section, the Board may subject Investment Houses to further regulations, pursuant to Republic Act 337, as amended, which may include but need not necessarily be limited to (a) liquidity reserve requirements; (b) capital-to-risk assets ratios; (c) interest rate ceilings; and (d) such other constraints as the Board may deem necessary.

In the exercise of its authority in this section, the Monetary Board may, whenever, it determines that the circumstances so warrant subject an Investment House to special examination.

Whenever on the basis of the reports submitted by, or upon examination of the books and records of, an Investment House, the Central Bank finds that the Investment House is not complying with the provisions of this section, with the pertinent provisions of this Decree, of other laws, or of orders, instructions, rules or regulations issued by the Monetary Board pertaining non-bank financial intermediaries and quasi-banking activities, said Board shall forthwith issue a cease-and-desist order upon the Investment House concerned. Failure on the part of an Investment House to comply with the cease-and-desist order shall subject said Investment House to a fine not exceeding two hundred (P200) pesos for every day the order is violated, to be imposed by the Monetary Board, without prejudice to the penalties provided in Section 16 of this Decree.

Section 13. Applicability of Securities Act. An Investment House may engage in the business of a dealer or a broker under the Securities Act without obtaining a separate license for the purpose as required in Section 14 of the Securities Act (C.A. No. 83, as amended).

Section 14. Applicability of Corporation Law. The provisions of the Corporation Law (Act No. 1459, as amended) insofar as they are not in conflict or inconsistent with the provisions of this Decree shall apply to Investment Houses

Section 15. Transitory provisions. Existing enterprises which are operating as Investment Houses shall, within one year following the approval of this Decree, comply with the requirements hereof, except with respect to the filing of an information sheet which shall be complied with within six months as provided in the last paragraph of Section 4 of this Decree.

Section 16. Penalties for violation. Upon proof that an Investment House is violating or not complying with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions, rulings or regulations issued by the Securities and Exchange Commission or by the Central Bank of the Philippines, the Securities and Exchange Commission shall impose upon the Investment House and collect a fine not exceeding two hundred (P200) pesos per day for every day during which such violation or non-compliance continues, and/or suspend its certificate of registration. The officer or director of the Investment House who ordered or authorized the violation or non-compliance shall be solidarily liable. The fine so imposed shall be paid to the Government of the Philippines through the Securities and Exchange Commission.

Without prejudice to the provisions of the preceding paragraph any person, or any director or officer of an Investment House who violates or does not comply with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions, rulings or regulations issued by the Securities and Exchange Commission or by the Central Bank of the Philippines, shall be punished by a fine of not more than twenty thousand (P20,000) pesos, or an imprisonment of not more than five years or both, at the discretion of the Court.

Section 17. Separability clause. The provisions of this Decree are hereby declared separable, and if any clause, sentence, provision or section hereof, or its application to any person or circumstance should be declared invalid, such invalidity shall not affect the other provisions of this Decree which can be given force and effect without the provisions which have been declared invalid

Section 18. Repeal. All Acts and existing laws inconsistent with this Decree are hereby repealed.

Section 19. Effectivity. This Decree shall take effect immediately.

Done in the City of Manila, this 15th day of February, in the year of Our Lord, nineteen hundred and seventy-three.

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BATAS PAMBANSA BILANG 66

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AN ACT AMENDING PRESIDENTIAL DECREE NO. 129, AS AMENDED, OTHERWISE KNOWN AS "THE INVESTMENT HOUSES LAW"

Section 1. Section 6 of Presidential Decree No. 129 is hereby amended to read as follows:.

"Sec. 6. Prohibitions. — Except as may be authorized by the Monetary Board, no director or officer of an Investment House shall concurrently be a director or officer of a bank, as defined in Section 2 of Republic Act No. 337, as amended: Provided, however, That in no event can a person be authorized to be concurrently an officer of an Investment House and of a bank except where the majority or all of the equity of the Investment House is owned by the bank.

"No Investment House shall engage in banking operations as defined in Section 2 of Republic Act No. 337, as amended."

Sec. 2. Section 7 of the same Decree is hereby amended to read as follows:

"Sec. 7. Powers. — In addition to the powers granted to corporations in general, an Investment House is authorized to do the following:

"(1) Arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

"(2) Participate in a syndicate undertaking to purchase and sell, distribute or arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

"(3) Arrange to distribute or participate in a syndicate undertaking to purchase and sell on a best-efforts basis securities of other corporations and of the Government or its instrumentalities;

"(4) Participate as soliciting dealer or selling group member in tender offers, block sales, or exchange offering of securities; deal in options, rights or warrants relating to securities and such other powers which a dealer may exercise under the Securities Act (Commonwealth Act No. 83, as amended);.

"(5) Promote, sponsor, or otherwise assist and implement ventures, projects and programs that contribute to the economy's development;

"(6) Act as financial consultant, investment adviser, or broker;

"(7) Act as portfolio manager, and/or financial agent;

"(8) Encourage companies to go public, and initiate and/or promote, whenever warranted, the formation, merger, consolidation, reorganization, expansion or recapitalization of productive enterprises, by providing assistance or participate in the form of debt or equity financing or through the extension of financial or technical advice or service;

"(9) Undertake or contract for researches, studies and surveys on such matters as business and economic conditions of various countries, the structure of financial markets, the institutional arrangements for mobilizing investments;

"(10) Acquire, own, hold, lease or obtain an interest in real and/or personal property as may be necessary or appropriate to carry on its objectives and purposes;.

"(11) Design pension, profit-sharing and other employee benefits plans;

"(12) Such other activities or business ventures as are directly or indirectly related to the dealing in securities and other commercial papers, unless otherwise governed or prohibited by special laws, in which case the special law shall apply;

"(13) Subject to prior approval by the Monetary Board, the provisions of Chapter IV of the Central Bank Charter, and such rules and regulations as may be issued by the Monetary Board, engage in foreign exchange operations which the Monetary Board identified as directly related under Subsection 8 of this section; and

"(14) Act as trustee of a trust fund or trust property, subject to the provisions of Chapter VII of the General Banking Act.

"Nothing in this section shall preclude other enterprises not covered by this Decree from engaging in the activities listed under subsection (3) to (11) of this section, except as may otherwise be governed by special laws."

Sec. 3. The same decree is hereby amended by adding a new section after Section 7 to read as follows:

"Sec. 7-A. Subject to applicable laws and regulations and with prior approval of the Monetary Board, an Investment House may be converted into a commercial bank authorized to operate under an expanded commercial banking authority pursuant to Section 21-B of Republic Act No. 337, as amended.".

Sec. 4. All Acts or parts thereof inconsistent with this Act are hereby repealed or modified accordingly.

Sec. 5. This Act shall take effect upon its approval.

Approved: April 1, 1980

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Presidential Decree No. 1797

AMENDING FURTHER PRESIDENTIAL DECREE NO. 129, AS AMENDED, OTHERWISE KNOWN AS "THE INVESTMENT HOUSES LAW".

WHEREAS, there must be greater cooperation among governmental agencies to ensure the accomplishment of desired objectives;

WHEREAS, there is a need to provide flexibility to government authorities in setting the capitalization requirement for investment houses in order to enhance the capability of the latter to compete and to finance the requirements of economic development.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order as follows:

Section 1. The third paragraph of Section 4 of Presidential Decree No. 129, as amended, is hereby amended to read as follows:

In determining compliance with the provisions of subsections (b) and (c) above, the Securities and Exchange Commission shall consult with and act pursuant to such recommendation as the Monetary Board of the Central Bank of the Philippines may make.

Sec. 2. Section 8 of the same Decree is hereby amended to read as follows:

"Sec. 8. The minimum initial paid-in capital of any Investment House shall be Twenty Million (P20,000,000) Pesos: Provided, That the Monetary Board of the Central Bank may prescribe a higher minimum capitalization if warranted by the circumstances..

Sec. 3. The first paragraph of Section 16 of the same Decree is hereby amended to read as follows:

"Sec. 16. Penalties for violation. — Upon proof that an Investment House is violating or not complying with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions, rulings or regulations issued by the Securities and Exchange Commission, the Commission shall impose upon the Investment House and collect a fine of not exceeding two hundred (P200.00) pesos per day for every day during which such violation or non-compliance continues, and/or suspend its certificate of registration. The officer or director of the Investment House who ordered or authorized the violation or non-compliance shall be solidarily liable. The fine so imposed shall be paid to the Government of the Philippines through the Securities and Exchange Commission.

Sec. 4. All laws, decrees, rules and regulations inconsistent with this Decree are hereby repealed or modified accordingly.

Sec. 5. This Decree shall take effect immediately.

Done in the City of Manila this 16th day of January, in the year of Our Lord, nineteen hundred and eighty-one.

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REPUBLIC ACT NO. 8366

AN ACT LIBERALIZING THE PHILIPPINE INVESTMENT HOUSE INDUSTRY, AMENDING CERTAIN SECTIONS OF PRESIDENTIAL DECREE NO. 129, AS AMENDED, OTHERWISE KNOWN AS THE INVESTMENT HOUSES LAW

SECTION 1. Declaration of policy. — It is the policy of the State to expand and strengthen the capital base of the economy in order to ensure sustained economic growth and development. Toward this end, the Philippine investment house industry is hereby liberalized, increasing foreign equity participation and raising the minimum capitalization of investment houses to enable them to meet the present and future demands of the market.

SECTION 2. Section 5 of Presidential Decree No. 129, as amended, otherwise known as the Investment Houses Law, is hereby further amended, to read as follows:

SEC. 5. Citizenship requirements. — At least forty percent (40%) of the voting stock of any Investment House shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in Investment Houses, the basis for the computation shall be the citizenship of each stockholder, and, if the stockholder is a corporation, the citizenship of the individual stockholders holding voting shares in that corporation. In approving foreign equity applications in Investment Houses, the Securities and Exchange Commission [underscoring ours] shall approve such applications only if the same or similar rights are enjoyed by Philippine nationals in the applicant's country.

Foreign nationals may become members of the board of directors to the extent of the foreign participation in the equity of said enterprise.

SECTION 3. Section 8 of the same Decree is hereby amended to read as follows:

SEC. 8. Capital requirements. — In the case of newly-organized Investment Houses, the minimum paid-in capital shall be Three hundred million pesos (P300,000,000). The minimum paid-in capital of the existing Investment Houses shall be Three hundred million pesos (P300,000,000) to be built up in two (2) years after the effectivity of this Act in the following manner: Two hundred million pesos (P200,000,000) after the effectivity of this Act and an additional Fifty million pesos (P50,000,000) for every year thereafter until the minimum capitalization is attained. The Monetary Board may prescribe a higher minimum capitalization in order to promote and ensure the stability of the Philippine capital market and the competitiveness of the investment house industry in line with the national economic goals. The Monetary Board shall, within six (6) months, prescribe a risk assets to capital ratio and other capital adequacy ratios in order to provide broader protection to the investing public.

SECTION 4. This Act shall take effect fifteen (15) days from its publication in a newspaper of general circulation.

Approved: October 21, 1997

© 2006 Islamic Banking Research Institute, Inc. “Islamic Bank as Investment House” September Ed., by Abdel Aziz Dimapunong is a property of the Islamic Banking Research Institute, Inc. All rights reserved. Except for a copy of the laws that are cited in this journal, reproduction of any other content, text or image, of this writing, in any form or medium without the express written permission of the writer or the Islamic Banking Research Institute Inc. is prohibited This journal is for informational purposes only and is intended solely for the benefit of persons who might be aware of investment opportunities. The services provided by the Islamic Banking Research Institute, Inc. are only for research and information.