Malaysia : More global banks may go for IIB licence

More international banks may be keen to obtain the country’s international Islamic banking (IIB) licence as interest  in syariah-compliant foreign currency business picks up, experts syariah-compliant foreign currency business picks up, experts say.

RAM Rating Services Bhd head of financial institution ratings Promod Dass said foreign banking groups with a strong interest in cross-border non-ringgit deals were likely candidates for any future IIB licences.

“It is also possible to see some interest from Middle Eastern banking groups to obtain this specialised licence,” he told StarBiz.

The IIB licences are offered under the Malaysia International Islamic Financial Centre initiative which was launched in August 2006 to promote Malaysia as a major hub for international Islamic finance.

Al Rajhi Bank Malaysia is among four banks with the international Islamic banking licence

The licences enable financial institutions to conduct a full range of Islamic banking activities in non-ringgit foreign currency business.

So far, only four banks have obtained the IIB licence – Unicorn International Islamic Bank Malaysia Bhd, PT Bank Syariah Muamalat Indonesia Tbk, Al Rajhi Bank Malaysia and Deutsche Bank (Malaysia) Bhd, which announced 1, March, 2010 that it had received the licence.

MIDF Research banking analyst Kelvin Ong said other global banks might be interested to use the country as a platform to tap the Islamic banking business in the Asian region.

“There is a possibility that these banks may be interested in obtaining an IIB licence. I am not surprised if this happens,” he said.

Ong said there were also attractive tax incentives offered to banks with IIB licences.

One such incentive is a tax exemption on income earned from international banking and takaful operations conducted in foreign currencies, either as a subsidiary or a branch, until 2016.

In addition, stamp duty exemption is provided for instruments executed on Islamic banking and takaful businesses conducted in foreign currencies until 2016.

Promod said that as the IIB licence was more institutional or corporate in nature and a distinct niche from the mainstream retail Islamic banking, it would help to deepen and broaden the country’s offerings as an international Islamic financial centre.

To be eligible for the licence, a financial institution must be well established and reputable, adopt international banking practices formulated by the Bank for International Settlements or other international standard-setting bodies, be regulated and supervised by a competent home regulatory authority and possess a sound track record.

The IIB entity can be set up as an incorporated company or branch, with the requirements for an incorporated entity to have a minimum paid-up capital of RM10mil and an annual licensing fee of RM50,000.

Source : the star


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