Stanchart says committed to Islamic banking after head of unit exits

Standard Chartered remains committed to Islamic banking and expects growth in its core markets, a spokesman for the lender said on Sunday, after the head of its Islamic arm departed.

Afaq Khan left Standard Chartered Saadiq, the lender's global Islamic banking business, after 12 years with the Asia-focused bank to take a career break, the spokesman said. A successor will be announced in due course, he added.

His departure follows the naming of the group's new chief executive, Bill Winters, who is expected to oversee a shakeup when he takes over in June in a bid to reverse a two-year slump.

"Standard Chartered remains committed to our Islamic banking business, and we continue to position ourselves for further growth in the core markets where the largest Islamic banking opportunities exist," the spokesman said.

The core markets include Bahrain, Malaysia, Bangladesh, Pakistan, Indonesia and the United Arab Emirates, where Standard Chartered offers personal banking services, the spokesman said.

The bank also offers structured finance for businesses in Bahrain, Jordan, Qatar, Turkey, the United States, Brunei, Malaysia, Saudi Arabia, the UAE, Indonesia, Pakistan, Singapore and the United Kingdom, according to the Standard Chartered Saadiq website.

The bank arranged $20 billion in Islamic financing for its customers in 2013, a rise of $3 billion from 2012, according to its 2013 annual report, the latest available.

But Standard Chartered is scaling down parts of its global business under a cost-cutting drive. In January, it announced plans to shut its global equities business and axe 4,000 jobs in retail banking.

Competition is intense in Islamic banking, especially in the Gulf where a number of cash-rich local lenders operate.

HSBC, another British bank, announced in 2012 that except for wholesale banking operations, it would no longer offer Islamic products in Britain, the UAE, Bahrain, Bangladesh, Singapore and Mauritius.

Khan is the second senior figure to depart from Standard Chartered Saadiq. Wasim Saifi, global head of Islamic retail clients, left the bank late last year. He was also the chief executive of Standard Chartered Saadiq, Malaysia.

(Reuters / 29 March 2015)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Japan looks for growth and influence from Islamic finance boom

Japan is the latest global financial hub to start making inroads into Islamic finance, a move that could help strengthen regional economic ties and give its lenders an edge in winning business in markets whose growth prospects far outpace their home turf.

Tokyo has long been a major provider of financial assistance for developing countries and its banks are active across Asia and the Middle East, but until now Islamic finance has played a minor role.

That could soon change amid a regulatory effort to facilitate development of the sector, and could even help Japan counter any loss of regional influence ahead of the launch of the China-led Asian Infrastructure Investment Bank.

Islamic finance, which follow religious principles such as bans on interest and monetary speculation, has boomed in the last few years on the back of strong economic growth in its core markets, the Gulf and southeast Asia.

The sector has grabbed the attention of global financial centres - Britain, Hong Kong and Luxembourg have all issued debut sovereign Islamic bonds over the past year - and the industry's worldwide assets are now estimated at more than $2 trillion.

In February, Japan's financial regulator said it would study relaxing rules for domestic banks to use Islamic financial products, potentially opening the world's second largest bond market to sukuk, or Islamic bonds.

Over the past year, Bank of Tokyo-Mitsubishi UFJ (BTMU), Japan's largest lender, and Sumitomo Mitsui Banking Corp have expanded their Islamic finance activities overseas.

"To fully respond to this opportunity BTMU is considering handling Islamic finance at its Dubai branch, its hub for the Middle East, subject to regulatory approval," a spokesperson for the bank said.

In September, BTMU became the first Japanese commercial bank to issue sukuk via its Malaysian unit.

Even the Japan International Cooperation Agency is jumping on the action, assisting Jordan in its plans to issue debut sukuk, as demand for such funding tools grows among majority-Muslim countries.

The moves are similar to those taken by Britain, as mature economies seek deeper links with high-growth markets, several of which are majority-Muslim countries, said Khalid Howladar, Moody's global head of Islamic finance.

"This is one way for both government and industry to forge closer economic and capital market ties," Howladar said.

GROWTH MARKET

In 2008, Japan's Financial Services Agency (FSA) amended rules to allow subsidiaries of Japanese banks to conduct Islamic finance transactions, with foreign subsidiaries later allowed to take Islamic deposits, but the rules are seen as restrictive.

The regulator is considering allowing banks to provide Islamic products in the domestic market for the first time, and will present the results of a consultation on rule changes later this month.

Islamic products require multiple transfers of title of the underlying asset, and so can present regulatory challenges for new jurisdictions in areas such as tax.

Japanese banks, as well as other corporates, want greater flexibility on the rules to help them grow their business overseas, said So Saito, counsel at law firm Nishimura & Asahi.

"As the weak point will be settled, Japanese banks can enter foreign markets more easily," Saito said.

Any FSA relaxation could help banks diversify away from a domestic market which saw 2.5 percent year-on-year loan growth in February, the bulk of that coming from Japanese regional lenders.

That trails the 8.3 percent growth in financing posted by Indonesian Islamic banks in 2014, a modest figure compared with the 25.2 percent growth posted a year earlier.

Japanese banks are keen to grab a greater share of that business: Sumitomo Mitsui started offering Islamic finance via its Malaysian subsidiary last year.

It has also partnered with the export credit insurance arm of the Islamic Development Bank to explore financing of infrastructure deals.

State-owned Japan Bank for International Cooperation has also considered sukuk, although a spokeswoman said the lender had no specific plans to tap the market.

Even the Asian Development Bank, where Japan is a key player, is ramping up efforts to encourage use of Islamic finance by its member countries. 

(Reuters / 31 March 2015)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com