Zeti: Mega Islamic bank creation must fulfill objective

KUALA LUMPUR: The creation of a mega Islamic bank must fulfill the objectives of being able to undertake international business and facilitate cross border financial flows, said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

She said that such a mega bank must also be able to support international trade and cross border investment activity.
“We do not want a mega bank for the sake of having a mega bank. We would like a mega bank which has the scale and ability to do that,” she told reporters after launching the Global Islamic Finance Forum 2014 at Sasana Kijang Tuesday morning.

She was responding to a question about the license for the proposed mega Islamic bank as a result of a merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd.

Dr Zeti said Bank Negara wanted to see the internationalisation and enhancement of Malaysia’s financial and economic connectivity with other countries.
She added that large conventional banks, such as the top five, had Islamic subsidiaries who were already making such efforts.

When asked about the possibility of another 25 basis points hike in the overnight policy rate, Dr Zeti merely said it would be discussed at the monetary policy committee meetings.
On Islamic finance (IF), she said that the internationalisation of IF was already happening with the most visible being the sukuk market.

“This is because you can see issuances in different currencies by issuers from non-Muslim countries such as Japan and the UK, as well as emerging economies like Turkey,” she said, adding however that there were also other IF products on offer.

Dr Zeti said that IF served the economy directly and had all the governance, risk management, transparency and disclosure in place.

“These are all important elements we want to see. That is why we have something to offer to the rest of the world,” she said.

She also noted that while Islamic banking was about credit intermediation, she said it could now diversify into investment intermediation.

Dr Zeti said this would not only further strengthen the linkage of finance and real economic activity, but also contribute towards more inclusive and balanced growth.

“It is not quite venture capital where they take an equity stake, but they finance a specific investment activity so it becomes a platform for investment intermediation,” she said.

In her keynote address earlier, she said the enactment of the new Islamic Financial Services Act 2013 had facilitated the maturing of the industry in the Malaysian Islamic finance marketplace.

She said the Act included new provisions which strengthened the potential role of Islamic financial institutions as investment intermediaries for risk-sharing to effectively take place.

“Legal recognition of investment accounts provides differentiation from deposits, which thereby opens up the avenue for Islamic financial institutions to further explore the various modes of operationalising such investment accounts,” she said.

After opening the GIFF 2014, Dr Zeti also conferred the “Emas” status to the Export-Import Bank of Malaysia Bhd’s (MEXIM) recent US$300mil five-year sukuk issuance.

Issued in February 2014, MEXIM’s sukuk represents the first sukuk issuance by an export-import bank and attracted a demand of over 10 times its issuance size.

She also jointly launched the Finance Accreditation Agency’s FAA Learning Standards (FLS) and Finance Qualification Structure (FQS) with Securities Commission chairman Datuk Ranjit Ajit Singh.

Developed by FAA in consultation with experts worldwide, the FLS aims to strengthen the human capital base of the financial services industry, with learners expected to gain common core competencies that would enable them to practice across jurisdictions.

“The FQS has strategic significance, as it aims to link the various qualifications relevant to financial practitioners under a cohesive framework which will allow for greater mutual recognition of qualifications and provide a clear and systematic learning path for financial professionals,” said Dr Zeti.

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