The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 169th Meeting

Shariah Advisory Council of Bank Negara Malaysia (the SAC) in its 169th meeting on 26 July 2016 discussed proposal on the application of facility rate in Restricted Committed Liquidity Facility (RCLF).

Application of Facility Rate in Restricted Committed Liquidity Facility (RCLF)

The SAC has approved the proposed charging of facility rate on Islamic banking Institutions that participate in the RCLF. The SAC viewed that RCLF is a facility that provides service and benefit to IFIs to facilitate IFIs to comply with regulatory requirement for having sufficient portion of High Quality Liquid Asset (HQLA) in their liquidity management. As such, the facility rate charged on IFIs is a consideration for those benefits that IFIs will enjoy throughout the agreed RCLF period.

In the event that the Islamic banking institutions which are participants of the RCLF require liquidity, there are two options of transactions:

1. Collateralised Commodity Murabahah (CCM) transaction will be executed between the Islamic banking institutions and Assets which are qualified for the RCLF will be used as collateral against indebtedness arising from the commodity murabahah transaction; or
    
2. Sale and Buy Back Agreement (SBBA) transaction between the Islamic banking institutions and BNM on the qualified assets for RCLF.

This ruling has considered the following:

1. Charging of facility rate does not lead to riba. In this transaction, there is no exchange of money for money or loan.
    
2. Fiqh maxim:

“The original position of rulings in mu`amalat is permissible, except when there is a provision prohibiting it.”

1. Payment or fee imposed as consideration for providing certain service and work that could benefit the counter party is acceptable by contemporary Shariah scholars.

This basis of Shariah ruling on the permissibility of charging facility rate in RCLF will be the basis for the formulation of relevant guidance note on RCLF to Islamic banks.

This statement aims to inform the ruling of SAC 169th meeting and its related discussions. The effective date of this ruling is subject to the effective date of Guidance Note on RCLF issued by Bank Negara Malaysia on 15 August 2016.