Published May 11, 2009

KL opening Islamic banking to more players

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(BANGKOK) Malaysia, which last month unveiled plans to open its Islamic finance industry further, is trying to lure larger overseas banks to provide services that comply with Muslim tenets, the central bank said.

'If we want to develop ourselves as an international financial hub, then it is important for us to have international banks,' governor Zeti Akhtar Aziz said last Saturday. 'We would like to see our financial landscape have an international Islamic financial institution of a large size that can take international business.'

Rising oil wealth and government initiatives have turned Islamic banking and insurance into an industry with US$1 trillion in assets globally. Malaysia said last month that it plans to issue as many as two Islamic banking licenses to overseas lenders this year and will let in more foreign lenders for the first time in more than a decade.

Malaysia's central bank also raised foreign ownership limits at local Islamic banks, investment banks and insurance companies to 70 per cent on April 27.

Malaysia's central bank gives tax breaks for Islamic products and has relaxed rules to allow commercial and investment banks to conduct Islamic business transactions in foreign currencies.

Bank Negara Malaysia has licensed three overseas Islamic banks. It has 17 Islamic banks, which include the Islamic units of HSBC Holdings plc and Standard Chartered plc, according to the central bank's website.

The new Islamic banks will be required to have paid-up capital of at least US$1 billion. Bank Negara has 'invited' applications for licences until October, Ms Zeti said. - Bloomberg