HSBC incorporates Islamic bank in Malaysia

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The bank takes a further step towards building its Islamic financial services division in Malaysian.
HSBC Group has set up its first Islamic bank after it fully incorporated its subsidiary, HSBC Amanah Malaysia Berhad, on February 28. It is a further step towards the bank’s objective to make Malaysia the regional hub for HSBC Amanah, the Islamic financial services division for the HSBC Group, which has its headquarters in Dubai and offices in eight cities worldwide. Other foreign banks already set up in Malaysia are likely to take the same route.

The new subsidiary aims to offer a “full suite of innovative Islamic products and services to retail and corporate customers”, according to Irene Dorner, deputy chairman and chief executive officer of HSBC Bank Malaysia Berhad. These are likely to start with an Islamic asset management business (the first for HSBC Group), provide vehicle financing and also set up an international currency business unit, says Ms Dorner.

Although HSBC Bank Malaysia has been offering Islamic financial services since 1994, the scope of products it has offered has been limited. By establishing a distinct, local, legal entity holding a universal banking licence, HSBC should be able to improve and expand its products. The first branch should open during the second half of the year.

In November last year, HSBC became the first locally incorporated foreign bank to be awarded a licence to set up an Islamic banking subsidiary.

The bank also boasts participation in several landmark Islamic transactions. In 1998, HSBC Amanah was lead manager for Malaysia Telecom’s Islamic cross-border syndication, and in 2002 it launched a global sukuk (Islamic equivalent of a bond) for Malaysia – the world’s first ever. Having bought an Islamic insurance (Takaful) subsidiary in Singapore in 2003, three years later it set up HSBC Takaful Malaysia. In 2005, HSBC Amanah was the lead manager for a $553 million securitisation issue for Cagamas, the Malaysian national mortgage corporation – the first ever Islamic securitisation deal in the country. Then, in the flowing year, the bank advised on the first short-term sukuk in an Islamic country with a $500 million issue for Brunei.

Malaysia’s Islamic finance industry has assets worth nearly $34 billion, making up about 13% of the country’s total banking sector. Bank Negara, the central bank, gives tax breaks for Islamic products and in August last year relaxed rules to allow commercial and investment banks to conduct Islamic business transactions in foreign currencies.

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