IslamicFinance.de

Malaysia and the Gulf Cooperation Council (GCC) countries remain the leaders in the Islamic finance industry, despite the emergence of new participants vying to get a piece of the pie. Bahrain Economic Development Board chief economist, Dr Jarmo Kotilaine, said an established financial industry required many component parts for its sustained development and the Islamic finance architecture was much more developed and complete in the Gulf and Malaysia than any other part of the world. Other centres can support the global growth of Islamic finance but are unlikely to challenge the established role of Southeast Asia and the Gulf, he said.

The World Bank plans to raise as much as $500 million worth of sukuk this year to help fund an immunisation programme, one of several initiatives from the multilateral body in the Islamic finance sector. The World Bank, acting as treasurer of the International Finance Facility for Immunisation (IFFIm), would help issue the sukuk. The World Bank has hired Standard Chartered and National Bank of Abu Dhabi to arrange the transaction, which could happen as early as this month although a specific timeframe has yet to be finalised. The size is expected to be between $300 million to $500 million, depending on market conditions. Since 2006, IFFIm has raised $4.5 billion through bonds, its last issuance was a $700 million bond in June of last year.

Malaysia-based International Islamic Liquidity Management Corp (IILM) hopes to widen its membership base as it seeks feedback from the market on its Islamic bond issuance programme. The IILM's short-term sukuk programme now has $1.65 billion of sukuk outstanding and could eventually grow to more than $2 billion; nine countries are directly represented in the IILM and it is keen to add more. A wider membership would boost demand for the IILM's sukuk, since Islamic banks in certain countries cannot hold IILM sukuk without permission from their local regulator. One potential new member is Oman; that country's central bank governor told Reuters last October that it was considering whether to join the IILM or allow its banks to hold IILM sukuk.

CIMB Islamic said it will pursue a larger balance sheet to help win more business, regardless of whether a proposed merger with two smaller peers happens. In July, CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd secured regulatory approval to begin merger talks. The enlarged entity aims to compete against conventional banks that dominate larger and more lucrative deals in Islamic finance and could prompt further consolidation in the domestic market. The lenders have until Oct 8 to finalise the pricing, structure and other terms of the merger. Earlier this week, Maybank dismissed rumours that it was considering a merger with Bank Islam, the country’s largest, full-fledged Islamic bank.

Saudi Arabia’s central bank has published new consumer lending regulations which give it the power to cap retail lending at individual banks and limit the fees that banks can charge. The rules could dent profit growth at banks, especially those that rely heavily on retail activity. The regulations, published on the Saudi Arabian Monetary Agency’s (SAMA) website, state that SAMA may, at its discretion, impose a restriction on a creditor under which its consumer financing portfolio may not exceed a specified percentage of its total financing portfolio. They also state that all fees, costs and administrative services charges collected by banks must not exceed either 1 percent of the financing amount or SR5,000 whichever is lower.

Islamic debt could become a source of funding for U.K. infrastructure projects from wind turbines to high-speed trains and airports as Britain cements its position as the first sukuk market in a non-Muslim nation. Investors see scope for the U.K. to issue Shariah-compliant bonds with varying maturities after the Debt Management Office attracted bids for more than 10 times the 200 million pounds ($331 million) of securities offered at its debut sale in June. There is investor appetite for more sales that could help fund almost 400 billion pounds of planned infrastructure projects. The U.K. government envisages 377 billion pounds of infrastructure projects in the coming years, with most of it financed privately or part-privately. Major projects include a high-speed railway link between London and Birmingham and wind turbines.

Having completed the acquisition of Barclays retail banking division in the UAE on September 1st, Abu Dhabi Islamic Bank has seen little change in its market growth. The $177 million deal will give ADIB access to Barclays’ 110,000 customers in the Emirates, as well as 145 staff members that will continue to work from existing branches. Having been hit with a $453m fine for its involvement in the Libor interest-rigging scandal back in 2012, Barclays has been stripping assets and jobs in an effort to boost profits. As such, the ADIB deal is, in fact, overshadowed by a far larger sale, as Barclays announced the sale of its Spanish retail, wealth management and corporate banking business for $1.04 billion to CaixaBank.

Rajhi Capital has started the offering period for the Al Rajhi Sukuk Fund. The Sukuk fund is an open ended fund designed to capture the opportunities available within the Shariah-compliant universe of sovereign, quasi-sovereign and corporate Sukuk, issued locally, regionally, as well as globally. The Fund will also invest in other income generating assets, within its mandate comprising of Commodity Murabaha Placements, Islamic Placements, Structured Islamic Products and Commodity Mudaraba Funds. The benchmark of the Fund is 3 month USD LIBOR 75 bps. Al Rajhi Capital is offering a special incentive whereby the subscription fees are waived for all new subscriptions until September 11 2014.

Zeti envisages the development of Islamic investment intermediation will come once a new generation of risk-sharing contracts can be applied to investment products and this will enable Islamic finance to help ensure more inclusive and more balanced growth.

As banks around the world gear up to meet tough Basel III regulatory standards, Islamic lenders face a source of uncertainty that could prove expensive for them: how regulators will treat their deposits. Because interest payments are not allowed by sharia principles, Islamic banks obtain deposits mostly through profit-sharing investment accounts (PSIAs), which are generally considered to be more volatile than conventional deposits. Islamic banks are expected to be required to offset that volatility under Basel III by increasing the amount of high-quality liquid assets (HQLAs) which are in short supply. The PSIA issue may increase pressure on central banks and governments around the Islamic world to address some longstanding problems in Islamic finance. One is the small supply of HQLAs.

The Indonesian government raised $1.5 billion worth of Islamic bonds on Tuesday, attracting the largest order book ever achieved for a sovereign sukuk from southeast Asia. The 10-year sukuk drew strong investor demand - order books were worth $10.2 billion - helping reduce the yield of sukuk which had originally started in the vicinity of 4.625 percent on Monday, before being trimmed to 4.35 percent. Indonesia's sukuk kickstarts what looks to be a busy month for sovereign issuance, with Luxembourg, Hong Kong and South Africa conducting investor meetings ahead of their respective transactions. Indonesia's sukuk was rated Baa3 by Moody's. CIMB, Emirates NBD Capital, HSBC and Standard Chartered acted as lead managers.

Morocco's Economic, Social and Environmental Council (CESE) weighed in on the Islamic bank bill on August 28th, proposing two changes. Two negative remarks were made by the CESE. The first related to a lack of consumer information necessary to avoid unfair marketing by Islamic banks. The second dealt with the need to clarify the roles of the National Council of Ulema and the central bank in the oversight of the sector. However, civil society activist and CESE member Hakima Naji opposed the intervention of the High Council of Ulema in the financial sector. She criticised the idea of religious management of finance and said that the central bank had the necessary ability to both traditional and Islamic banks.

Khazanah Nasional Bhd is considering the issue of Sukuk or Islamic bonds in Eastern Europe following the opening of its office in Istanbul, Turkey, last November. Executive director and chief financial officer Mohd Izani Ghani said the office was established to tap investment opportunities around Turkey, North Africa and Eastern Europe. He, however, said Khazanah was not planning on issuing a foreign currency Sukuk. There is a push for Khazanah to do 'kebab' sukuk but the interest rate environment in Turkey is on the high side and volatile, he added. The lender wants to do sukuk in other currencies that can match the stable environment, currency and interest rates in the country, he said.

Oman is expected to issue 500 million rials ($1.3 billion) worth of conventional and Islamic sovereign debt early next year, and aims to choose the arranging banks in October. Last month, the finance ministry received applications from banks to arrange the issuance, with plans to raise 300 million rials via conventional bonds and 200 million rials with sukuk, said Jamil Al Jaroudi, chief executive of Bank Nizwa. The issuance would be in local currency and would apparently be separate from an international, U.S. dollar-denominated sovereign bond issue which Oman has said it may conduct. It is expected to be in the market in the first quarter of 2015.

CIMB Islamic said it will pursue a larger balance sheet to help win more business, regardless of whether a proposed merger with two smaller peers happens. In July, CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd secured regulatory approval to begin merger talks. The lender's chief executive Badlisyah Abdul Ghani said that scale is important in being effective in business, so whether that scale is achievable under the current proposed merger talks or something else, the bank will continue to pursue it. The lenders have until Oct. 8 to finalize the pricing, structure and other terms of the merger. Details have yet to be ironed out, but the new Islamic bank could have assets worth 122 billion ringgit ($38.3 billion).

Gulf countries will be the engine driving the growth of the global sukuk market, according to a report released on Monday by the Dubai Chamber of Commerce and Industry. The report, which is based on data from the UK Islamic Finance Secretariat (UKIFS) and the Malaysia International Islamic Financial Center (MIFC), expected sukuk to play an important role over the next decade in securing funds for a substantial line-up of new projects in GCC countries, particularly in Dubai. The GCC and Malaysia are the traditional hubs for the issuance of sukuk. But the report sees other countries also playing major roles in the spread of the asset class, with emerging Islamic finance markets such as Tunisia, Mauritania, Senegal and Oman having the potential to become major sukuk hubs in the future, it said.

Sharjah gears up for its first Shariah-compliant bond sale this month. The emirate may price the debt to yield 2.5 percent to 3 percent if it’s a five-year issue. That compares with a yield of about 2.66 percent on non-Islamic notes due 2019 for Dubai, which doesn’t carry a rating. Sharjah’s A3 rating at Moody’s Investors Service, a grade four levels above junk, widens the pool of investors who can buy the debt. Moody’s cited the emirate’s “strong” fiscal and government-debt position, which may appeal to some money managers in Asia and Europe whose fund rules prevent them from holding non-rated or below-investment-grade debt. The emirate will meet investors in the U.A.E., Saudi Arabia, Singapore, Malaysia and the U.K., and will sell a sukuk subject to market conditions.

Allianz SE believes that it is not economically viable to enter into Malaysia's domestic takaful market just yet, board member Manuel Bauer said. He believes that growth in the Islamic insurance sector is beginning to cool down and would therefore be a struggle to justify any major investments to its shareholders. Bound by Bank Negara Malaysia's restrictions that caps foreign ownership at 70% in a local insurers, he said, Allianz's is answerable to its shareholders if it decides to take certain acquisition risk. Bauer also argued that the domestic takaful market has been stagnant and not performing as well as one thought it to be. Bauer said that taking into account Allainz's position in Malaysia as market leaders in both life and general business, the takaful potential figures are not convincing.

Maybank Islamic Bhd has dimissed speculations that it is in talks with Bank Islam Malaysia Bhd over a potential merger and acqusition (M&A). Its chief executive officer Muzaffar Hisham said the proposed merger of three local financial institutions to create a mega Islamic bank has not prompted Maybank Islamic to rush into M&A for expansion. Muzaffar said Maybank Islamic will continue to focus on its key objective, namely humanising financial services, which has been the driver of the bank’s outstanding track record over the last three to four years. Meanwhile, Muzaffar said Maybank Islamic is optimistic of maintaining its growth momentum in the second half of the year after recording an encouraging performance in the first half.

Schedule
October 28, 2014, Tue 09.00 - 16.45 h

Content
At the first Liechtenstein Islamic finance conference, the Financial Market Authority (FMA) and the Propter Homines Chair for Banking and Securities Law at the University of Liechtenstein will examine the challenges to and opportunities for Islamic finance structures and sharia compliant financial intermediation for Liechtenstein. We believe that Liechtenstein’s expertise as a renowned private and family wealth centre with a strong preference for non-leveraged long-term investments, well-developed trust and foundation laws, as well as a competitive financial regulation may provide the starting point for offering services in the Islamic domain. We are delighted that experts in the field of Islamic finance and sustainability will assist us in answering the questions on how Liechtenstein may benefit from Islamic finance, and how Islamic investors and clients may benefit from Liechtenstein.

We would like to advise you of the coming Liechtenstein Islamic Finance Conference and would appreciate your participation. The conference concerning