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Friday, 10 October 2014

Tiny Liechtenstein plans push into Islamic finance

The European principality of Liechtenstein is launching a drive to attract Islamic financial business, aiming to capitalise on its well-established wealth management industry.

Competition is increasing among financial centres around the world to capture a slice of Islamic finance, which is expanding beyond its traditional bases in southeast Asia and the Middle East.

Most efforts so far have focused on the booming market for sukuk (Islamic bonds); Luxembourg, Britain and Hong Kong, seeking to draw more issuance activity, have made debut issues of sovereign sukuk this year.

But Liechtenstein, a tiny Alpine state with a population of about 36,000, is concentrating instead on wealth management through a coordinated effort by the public and private sectors.

The financial regulator is exploring tax and legal amendments to facilitate sharia-compliant wealth management, including aspects of inheritance and corporation law, said Urs Philipp Roth-Cuony, chairman of the Financial Market Authority (FMA).

"It seems pretty much feasible to combine principles of Islamic finance with Western standards. London does it, Luxembourg does it, others do it - that should not be a stumbling block," Roth-Cuony said in an interview.

A conference in Liechtenstein on Oct. 28 will feature sharia scholars and industry bodies including the Malaysia-based Islamic Financial Services Board (IFSB) and the Bahrain-based International Islamic Financial Market.

The FMA may eventually join the IFSB, becoming only the second regulator in Europe to do so after Luxembourg.
"If we are successful in starting a process of building an Islamic financial market here, then of course the IFSB is the first place to go."

Islamic finance follows religious principles which shun activities such as gambling and outright monetary speculation.
Liechtenstein, known a decade ago for its banking secrecy laws which permitted some of the world's wealthy to avoid taxes, has since reformed its regulation and now markets itself as a centre of socially responsible investing.

As of December, there were 119 asset management firms in Liechtenstein which held 29.8 billion Swiss francs ($31.3 billion) in assets, a 26.6 percent increase from a year earlier.

Liechtenstein's biggest bank LGT, owned by the principality's royal family, has links to the Middle East through operations in Bahrain and Dubai.

Islamic finance could help to develop stronger or altogether new links, said Prince Michael von und zu Liechtenstein, a member of the royal family and chairman of Industrie- und Finanzkontor, a Vaduz-based wealth management firm.
"We hope that investors and businesses from the Middle East and the Asian region will recognise our efforts, which then would help to forge stronger relations."

A working group of policy makers and business associations will be set up to help direct Liechtenstein's Islamic finance push, said Dirk Zetzsche, professor of law at the University of Liechtenstein, which is co-hosting this month's conference with the FMA.

The university is considering activities such as academic research into Islamic finance, he added. This would include studies of the cost efficiency and ethical orientation of the intermediary structures often used in Islamic finance.

(Reuters / 09 October 2014)
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