<![CDATA[This study examines and reconstructs the limits of Islamic banks’ liability for underlying asset determination in Islamic banking investment products under Financial Services Authority Regulation No. 4 of 2026. The legal problem arises from the unclear boundary between investment losses constituting reasonable business risks borne by Investor Customers and losses attributable to the bank’s professional misconduct. This normative-doctrinal legal research employs statutory, conceptual, and analytical approaches. Legal materials comprising legislation, fatwas, and scholarly literature are analyzed through systematic interpretation and prescriptive legal reasoning. The analysis produces three findings. First, POJK No. 4 of 2026 constructs Islamic banking investment products as restricted investments by linking the contract, investment amount, tenor, and return mechanism to identifiable productive underlying assets. Second, the allocation of investment risk to Investor Customers does not transfer all losses because Islamic banks remain subject to prudential, Sharia-compliance, disclosure, suitability, segregation, governance, and fiduciary obligations. Thus, Investor Customers bear losses arising from normal business performance, while Islamic banks remain liable for losses caused by improper asset determination, negligence, contractual or Sharia violations, conflicts of interest, fund commingling, inadequate disclosure, or supervisory failure. Third, the regulation requires a clearer mechanism to distinguish asset-performance risk from bank-caused loss. The study’s novelty lies in a three-stage liability model: prudent asset determination, trustworthy management and supervision, and liability and loss recovery. Its scientific contribution is a normative framework integrating risk sharing with Islamic banks’ fiduciary and professional responsibilities.]]>
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