Monday, June 2, 2003
Malaysia to open doors to foreign Islamic banks
Reuters Kuala Lumpur, June 2
Malaysia will open the door to foreign Islamic banks and introduce new measures to help the country emerge as a regional hub for Islamic finance, its central bank chief said on Monday.
Islamic banking accounts for 9.2 per cent of Malaysia's banking assets and the government wants that share to rise to 20 per cent by 2010. Islamic banking bans the payment of interest. Investors and borrowers instead enter into a profit-sharing arrangement.
Bank Negara governor Zeti Akhtar Aziz said the central bank would issue new Islamic bank licences to qualified foreign players with a presence in the global Islamic banking industry.
"This will generate spill-over effects that will enhance the diversity and spur the overall development of the Islamic financial system," Zeti said at the launch of Islamic banking services of top investment bank CIMB. She gave no further details.
Malaysia last June completed the world's first Islamic global bond issue, lead managed by HSBC.
Zeti said the issue was a catalyst for other countries and corporates to tap the global Islamic financial market.
"Leading global investment banks are now according greater focus and resources to tap this potential and have become more important players in this market," she said.
There are two domestic Islamic banks in Malaysia but most conventional banks, including foreign-owned ones, offer Islamic banking services alongside conventional services.
Zeti said Bank Negara was working on new initiatives to develop the financial and legal infrastructures of the Islamic banking industry. These include new disclosure standards for Islamic banks and court procedures to handle cases involving Islamic finance.
Islamic banking also outlaws investments in companies involved in gambling, alcohol and pig farming.
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