An Overview of Legislative Conflicts in Malaysian Islamic Banking Sector Based on The Central Bank of Malaysia Act 2009
Malaysia has emerged as the first country to implement a dual banking system whereby an Islamic banking system functions on a parallel basis with the conventional banking system. However, it is perceived that somehow there are conflicts within the banking system itself due to existence of the dual financial system where common law and Islamic law are applied to different group of people and in special circumstances as required by the Federal Constitution of the country. Another issue is that Islamic banking is a concept based on hundred percent Islamic ideologies but when adopted in Malaysia, it is forced to follow certain rules and regulations which are based on the principles of English common law which substantially inconsistent to Islamic law. This has led to clash of court approach as the law applicable to Islamic banking shall be in conformity with Islamic law. Therefore, Islamic banks in Malaysia are facing with the complex task of introducing and developing Islamic banking products which are not only Shariah compliant but also compliant with the existing Acts of Parliament. Hence, the purpose of this article is to specifically determine the legislative conflicts under the Central Bank of Malaysia Act 2009 and to propose several recommendations on how to overcome those conflicts. The findings suggest that there is a pressing need for Malaysian parliament to amend the provision of the Central Bank of Malaysia Act 2009 so that the efficacy of the Malaysian regulatory and supervisory framework for Islamic banking will always be at the top level.
Keywords- common law, conventional banking, Islamic banking, Islamic law, legislative conflict.