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Wednesday October 27, 2010

One mega Islamic bank this year

Bank Negara to issue up to two mega Islamic bank licences

KUALA LUMPUR: Bank Negara will announce one mega Islamic bank by this year under its plan to issue up to two mega Islamic banking licences.

“We will announce one mega Islamic bank,” governor Tan Sri Dr Zeti Akhtar Aziz said yesterday on the sidelines of the Global Islamic Finance Forum 2010.

It was previously reported that Malaysia had shortlisted two foreign banks to be licensed as mega Islamic banks with a minimum capital of US$1bil each under the Government’s financial sector liberalisation measures announced last year.

On the country’s economy, she said Malaysia would remain firmly on its recovery growth path this year given the strong domestic economy.

Tan Sri Dr Zeti Akhtar Aziz says Bank Negara will announce one mega Islamic bank this year.

“Although there will be some moderation, we will continue on our growth path and if we manage well, we can achieve a 6% growth next year,” she told reporters.

Zeti said Bank Negara did not see inflationary pressures presently and interest rates were at appropriate levels.

She added that there were no formation of asset bubbles in Malaysia for now, but that Bank Negara had the relevant measures to contain the formation of such bubbles.

“There may be pockets of areas where we see speculative activities but this is not a generalisation for the overall market,” she said.

Moving forward, Bank Negara will look to implement measures to curb the level of household debt so that it does not become a de-stabilising factor to the economy.

“When we look at non-performing loans for the household sector, it has not increased significantly. Right now, it is not an area of concern. But going forward, while consumption drives growth, we (also) want it to progress in a manner that meets prudential levels,” she said.

She said that there was a need for a financial literacy awareness programme to encourage financial literacy among youngsters.

When asked to comment on the currency wars taking place now, Zeti said the ringgit depended on (capital) inflow and outflow and that Bank Negara would only intervene if market conditions became disorderly or saw very excessive movements transpiring within a short period.

Asked when the newly-established International Islamic Liquidity Management Corp (IILM) would look to issue its first short-term papers, Zeti said probably in the first half of next year as IILM was in the process of establishing itself and hiring a chief executive officer.

“The staff will be from the industry (private sector) while the board and shareholders will comprise the regulators. The short-term instruments will be denominated in international reserve currencies like the US (dollar) and the euro to facilitate cross-border liquidity management,” she added.

During her special session on the Islamic Finance and Financial Stability Report, Zeti said that IILM shareholders (regulators) would look to commit a minimum of US$5mil per shareholder. Eleven central banks and two multilateral organisations signed on Monday the Articles of Agreement for the establishment of IILM.

Meanwhile, the Islamic Finance and Financial Stability report talks about the state of Islamic financial services industry and the challenges and strategies for strengthening financial stability in the Islamic financial system.

Key highlights include the eight building blocks to strengthen foundations of the Islamic financial system, which include development of a robust liquidity management infrastructure, implementation of cross-sectoral prudential standards, strengthening financial safety nets and macro-prudential surveillance.

In another statement, Bank Negara said all new Islamic financial products to be offered by Islamic financial institutions or any existing products to be offered to new customers must comply with the Syariah Resolutions in Islamic Finance (Second Edition) rulings released yesterday.

“However, for Islamic financial products which have been contracted between the customers and Islamic financial institutions based on syariah rulings published in the first edition and the summary of national syariah advisory council (SAC) decisions, the contracts remain in force until maturity,” Bank Negara added.

This second edition of the SAC resolutions, which is a compilation of all syariah resolutions made between 1997 and 2009, is a continuation to deepen the understanding on the syariah interpretations and the juristic reasoning for the rulings.

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