S’pore-based bank keen to establish presence there: CEO
SINGAPORE’S Islamic Bank of Asia (IB Asia) is ‘very excited’ by the news that Malaysia is opening up its banking sector further to foreign players and will consider taking a stake in an Islamic bank there or applying for a local banking licence in future, chief executive Vince Cook said yesterday.
‘That’s something we’d definitely be considering,’ he told reporters here in a conference call to announce a new product for the bank.
‘We’ve said consistently from the beginning that having some business and some representation in Malaysia is part of being a credible regional player in the Islamic banking space.’
Last Monday, Malaysian Prime Minister Najib Razak said the government would issue up to six new licences to foreign financial institutions this year, including two to foreign Islamic banks, as part of broader, long-term changes to the country’s financial services sector.
He also said that foreigners would be allowed to own majority equity stakes of up to 70 per cent in some local financial institutions, including Islamic banks, compared with 49 per cent previously.
‘Obviously, it’s a bit early to see how those rule changes will be implemented and what it’ll actually mean for us, but we’re very excited by the prospect,’ Mr Cook said.
‘We’ve definitely surveyed the existing participants, and we have relationships with almost all of the Islamic banking players in Malaysia anyway,’ he added.
‘So we have quite a number of discussions running at different speeds and different levels, around partnerships in terms of either specific transactions or a certain type of product.
‘Now the road is a bit more open for us to expand on those discussions,’ Mr Cook said.
But foreign firms that want to apply for the new Islamic banking licences Malaysia is offering will need to set up banks there with a paid-up capital of at least US $1 billion. That could prove a difficult hurdle for all but the biggest Islamic banking players, based in the Middle East.
IB Asia, a subsidiary of DBS Group, has a paid-up capital of just US $500 million – half from DBS and the rest from 33 investors based in the Gulf Cooperation Council (GCC) countries.
Since its launch in May 2007, IB Asia has focused on investment and wholesale banking, offering corporate finance and private banking services rather than mass-market retail banking.
The first three months of the year were ‘relatively quiet’ in terms of new transactions for the bank, but ‘in the last six weeks, we’ve seen quite a pick up in the deal pipeline’, Mr Cook said.
‘I would say that there is now momentum building again, and actually the signs are very good for an excellent second quarter,’ he added.
Asked if IB Asia would be opening new overseas offices this year, Mr Cook said its priority was to develop its existing office in Bahrain – ‘the source of quite a lot of business for us’ – first.
Yesterday, the bank launched its first Syariah-compliant US-dollar cash management product, equivalent to a conventional fixed deposit, for companies and wealthy individuals.
Mr Cook said the product was a ‘test case’ for the bank to gauge the reaction and level of demand from investors to such products.
‘Over a period of time, we want to build a long- term sustainable base of clients, and this is a good way to start to get a sense of who’s interested in building a relationship with an Islamic bank in Singapore,’ he said.
Jointly distributed by IB Asia and DBS’s private banking division, the USD Islamic Placement requires a minimum sum of US $500,000, and is available in three-month or six-month terms.
It offers slightly higher rates than conventional US-dollar fixed deposits here, and is aimed at small businesses with excess cash, as well as mass-affluent and private-banking customers, Mr Cook said.
The bank is likely to launch similar products, denominated in Singapore dollars, ‘very soon’, he added. ‘Also, we’re quite keen to lower the minimum balance required.’
The product – which is designed to behave just like a fixed deposit from a customer’s perspective – is available for one month, starting yesterday. It is covered by the government’s guarantee for deposits until end-2010.
Source : Business Times Singapore