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MALAYSIA, THE FUTURE GLOBAL

PRIVATE BANKING HUB:

OPPORTUNITIES AND CHALLENGES

CONFERENCE ON PRIVATE BANKING

2nd Annual Conference on Islamic Wealth Management

BNP-Paribas – INCEIF Centre for Islamic Wealth Management

1 October 2014

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RISING DEMAND FOR ISLAMIC FINANCIAL SERVICES

Sustained economic headship in EMEs &

stronger pace of recovery in developed

economy drive the growth of Islamic

financial services

Increase in HNWIs

in Asia-Pac

Growth in Muslim population* in MENA & Asia

Global Islamic asset management industry

reached USD73.8bln in AuM, up 3.0% from 2013’s

USD71.6bln and 10.3% from USD66.9bln at 2012** (1Q14)

Asia Pacific continued to drive the global HNWI population growth in 2013 reaching 4.33 million (increase of 17.3%) and wealth growing 18.2% reaching USD

14.2 trillion*

Expansion of Islamic wealth management service providers (private

Islamic pension funds, Islamic family offices, Islamic trusts and foundations) is

expected to boost the preference for and the performance of Islamic funds**

China’s 2% Muslim population is expected to be 19th largest globally in

2030

India – projected to have 3rd largest Muslim population in the world by 2030, after Pakistan and Indonesia

Australia – Muslim population to grow by nearly 80% from 0.04 million (2010)

to 0.7 million (2030)

PRIVATE BANK PRESENCE IN ASIA

Source: World Wealth Report 2013* Islamic Funds Review, 1Q14, KFH Research**

HNWI trust and confidence in the wealth management industry surged about 75% expressing high levels of

trust in wealth managers and firms in early 2014, up from 61% in 2013*

HNWIs took on a more global mindset in early 2014, allocating over one-

third (37%) of their assets outside of their home region, up from one-

quarter (25%) in 2013*

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Islamic Windows Full-Fledged Islamic Banks

Islamic

Banks

Investment

Banks

Dev.t

Financial

Institutions

Commercial

Banks

International

Islamic

Banks

Development

Financial

Institutions

Re-

takaful General &

Family Family

Takaful

• Affin Islamic Bank

• AmIslamic Bank

• CIMB Islamic Bank

• Hong Leong Islamic

• Maybank Islamic

• RHB Islamic Bank

• Public Islamic Bank

• Kuwait Finance House

• Al Rajhi Bank & Invst Cp

• Asian Finance Bank

• HSBC Bank

• OCBC Al-Amin

• Stan. Chartered Saadiq

• Mizuho Corporate Bank

ICBUs

ICBUs

• AmInvestment Bank

• Bank of Tokyo Mitsubishi UFJ

(M)

• OSK Investment Bank

DIVERSE PLAYERS OFFERING ISLAMIC BANKING & TAKAFUL PRODUCTS AND SERVICES

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Lis2

JV IFMC Local Foreign

1 Asian Islamic Investment Management S/B 49% 51%

2 CIMB-Principal Islamic Asset Management S/B 50% 50%

Wholly-owned Local IFMC

3 AmIslamic Fund Management Sdn. Bhd.

4 BIMB Investment Management Berhad

5 i-VCAP Management Sdn. Bhd.

6 Muamalat Invest Sdn. Bhd.

7 Maybank Islamic Asset Management Sdn. Bhd.

8 RHB Islamic International Asset management Sdn. Bhd.

9 Kenanga Islamic Investors Berhad

Foreign IFMC

10 Aberdeen Islamic Fund Management S/B

11 Amundi Islamic Malaysia S/B

12 BNP Paribas Islamic Asset Management Malaysia Sdn. Bhd.

13 Eastspring Al-Wara' Investments Berhad

14 Franklin Templeton GSC Asset Management Sdn. Bhd.

15 KFH Asset Management Sdn. Bhd.

16 Nomura Islamic Asset Management Sdn. Bhd.

17 Guidance Investments Sdn. Bhd.

18 Saturna Sdn Bhd

19 Threadneedle Asset Management Sdn. Bhd.

6 OF THE TOP 20 ISLAMIC FUNDS MANAGEMENT COMPANIES ARE FROM MALAYSIA

LIST OF MALAYSIA’S IFMCs

Total AUM of IFMCs as at 30 June 2014: RM105.20 billion

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MARKET SHARE OF TOP 20 GLOBAL IFMCs (as at December 2012)

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WIDE RANGE OF SHARIAH-COMPLIANT INVESTMENT INSTRUMENTS – Part 1

73.5% of total listed securities are

Shariah compliant

Market cap = RM1.7 trillion

Shariah-compliant equities

FTSE Bursa Malaysia Shariah Indices are

based on internationally compliant criteria

Source: Securities Commission, as at June 2014

June 2014 June 2013

Number of Shariah-compliant

securities 666 800

Total listed securities 906 910

% to total listed securities 73.5% 87.9%

Market capitalisation (RM billion)

Shariah-compliant securities 1,087.91 1,007.72

Total market capitalisation 1,770.42 1,598.81

% to total market capitalisation 61.4% 63.0%

Islamic AUM is steadily growing

16.7% of total industry

Islamic AUM Islamic Asset Under Management

(RM billion) June 2014 June 2013

Islamic AUM 105.20 82.23

Total industry 628.40 555.32

% to total industry 16.7% 14.8%

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WIDE RANGE OF SHARIAH-COMPLIANT INVESTMENT INSTRUMENTS – Part 2

Source: Securities Commission, as at June 2014

Islamic wholesale funds

185 Islamic unit trust funds

NAV = RM45.27 billion

(12.8% of total industry)

Islamic unit trust funds

64 Islamic wholesale funds

NAV = RM17.75 billion (27% of total industry)

Islamic Unit Trust Funds

Number of launched

funds June 2014 June 2013

Islamic UTF 185 177

Total industry 601 599

NAV Islamic UTF (RM

billion) 45.27 37.55

NAV Total Industry (RM

billion) 354.26 326.40

% to total industry 12.8% 11.5%

Islamic Wholesale Funds

Number of launched

funds June 2014 June 2013

Islamic UTF 64 48

Total industry 217 185

NAV Islamic WF (RM

billion) 17.75 15.73

NAV Total Industry (RM

billion) 65.72 57.62

% to total industry 27.0% 27.3%

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WIDE RANGE OF SHARIAH-COMPLIANT INVESTMENT INSTRUMENTS – Part 3

Source: Securities Commission, as at June 2014

1st Islamic REITs listed on the

stock exchange

Currently 3 listed Islamic REITs:

Hospital REIT

Commercial building REIT

* Including 1 stapled securities (equity

+ REIT)

1st Islamic ETF in Asia

(Jan ’08)

Listed on Bursa Malaysia 31.5% of total industry

Islamic REITs

Islamic ETFs Islamic Exchange Traded Funds

Number of approved

ETF June 2014 June 2013

Islamic ETF 2 1

Total industry 6 5

Market capitalisation

Islamic ETF (RM billion) 0.32 0.28

Market capitalisation

total industry (RM

billion)

1.03 1.04

% to total industry 31.5% 28.8%

Real Estate Investment Trust (REIT)

June 2014 June 2013

Islamic REIT 3 4

Total industry 16 17

Market capitalisation

Islamic REIT (RM billion) 14.30 16.05

Market capitalisation

total industry (RM

billion)

34.10 37.89

% to total industry 41.9% 42.4%

Source: Securities Commission, 20 May 2014

Main Market/ ACE Market

Shariah-compliant securities

Total securities

Percentage

of Shariah-compliant securities (%)

Consumer Products 108 134 81

Industrial Products 200 259 77

Mining Nil 1 Ni

Construction 36 44 82

Trading / Services 141 204 69

Properties 64 85 75

Plantation 35 39 90

Technology 72 91 79

Infrastructure (IPC) 5 6 83

Finance 2 35 6

SPAC 2 2 100

Hotels Nil 4 Nil

Closed End Fund Nil 1 Nil

TOTAL 665 905 73

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SHARIAH-COMPLIANT SECURITIES ON BURSA MALAYSIA

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COMPREHENSIVE ISLAMIC BANKING & TAKAFUL PRODUCTS

Deposit

Islamic Product Conventional Comparable

• Commodity Murabahah Deposit

• Mudharabah Investment Account

• Islamic Negotiable Instrument of Deposits (NID)

• Fixed Rate Deposit

• Profit Sharing Investment

• Negotiable Debt Certificates

Money

Market &

Fixed

Income

• Acceptance Bill Islamic (AB-i)

• Government Investment Issues (GII)

• Malaysian Islamic Treasury Bills (MiTB)

• Sukuk Bank Negara Malaysia Ijarah

• Bank Negara Monetary Notes

• Islamic Private Debt Securities

• Bankers Acceptance (BA)

• Malaysian Government Securities (MGS)

• Malaysian Treasury Bills (MTB)

• Bank Negara Monetary Notes

• Floating Rate Bank Negara Monetary Notes

• Private Debt Securities

Derivatives

• Islamic Profit Rate Swap

• Islamic Forward Rate Agreement

• Islamic Cross Currency Swap

• Islamic Options

• Islamic Structured Deposit

• Interest Rate Swap

• Forward Rate Agreement

• Cross Currency Swap

• Options

• Deposit

Takaful

• General Insurance

• Life Insurance

• Composite Insurance

• Reinsurance

• Wealth management Insurance Solutions

• General Takaful

• Family Takaful

• Composite Takaful

• Retakaful

• Wealth Management Takaful Solutions

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IIB Islamic Bank Investment Bank IFMC CMSL

SCOPE OF

BUSINESS

Islamic banking

business in

international currency

(non-RM):

Deposit-taking

Financing

Investment banking

services

Investment in

securities and

properties

Islamic banking

business (universal):

Deposit-taking and

investment accounts

Financing, hire

purchase, leasing,

factoring business

Consultancy and

advisory services

relating to corporate

and investment

Dealing in foreign

currencies and gold

Money remittance

Making/managing

investment

Investment banking services

including banking and capital

market activities:

Dealing in equity and

exchange traded securities

Dealing in debt securities

Fund management and

unit trust businesses

Financial planning

Corporate finance

Futures broking, trading &

management

Deposit-taking; minimum

RM500k

Financing (to complement

IB’s fee-based activities

and to offer complete

investment banking

packages to clients)

Fund management

activities:

Manage a portfolio

of securities or

derivatives or a

combination of

both.

Unit trust

REITs manager

Business trust

Dealing in securities

Dealing in

derivatives

Dealing in private

retirement schemes

Fund management

Advising on

corporate finance

Investment advice

Financial planning

RM

TRANSACT-

IONS

Restricted and limited

to:

Hold instruments for

investment purpose,

maintain RM and

external account with

onshore Islamic banks

No restriction No restriction No restriction No restriction

STATUTORY

RESERVE

Exempted from the

Statutory Reserve

Requirements

4% of eligible liabilities 4% of eligible liabilities N/A N/A

ISLAMIC PRIVATE BANKING: COMPARISON OF LICENSES – REQUIREMENTS FOR

PRUDENTIAL STANDARDS & BUSINESS SCOPE

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IIB Islamic Bank Investment Bank IFMC CMSL

CAPITAL

REQUIREMENTS

Min of RM10 mil paid-

up capital & net

working funds

Min of RM300 mil capital

funds

Min capital funds unimpaired

by losses RM2 billion

(banking group)

Min capital funds RM500

million (not part of banking

group)

Min paid-up capital is

RM2 million and maintain

minimum shareholders’

funds of RM2 million at all

times

Paid up capital RM10

million for retail activities

(manufacture and

distribution of unit trust

funds)

REGULATORY,

SUPERVISORY

& PRUDENTIAL

FRAMEWORK

FSA/IFSA and CMSA

BNM – prudential

regulation to

ensure safety &

soundness in the

interest of

depositors e.g.

capital adequacy,

risk management,

liquidity, and single

exposure limit

SC – business and

market conduct to

promote market

integrity & investor

protection in the

capital market.

FSA/IFSA and CMSA

BNM – prudential

regulation to ensure

safety & soundness in

the interest of

depositors e.g. capital

adequacy, risk

management,

liquidity, and single

exposure limit

FSA/IFSA and CMSA

BNM – prudential regulation

to ensure safety &

soundness in the interest of

depositors

SC – business and market

conduct to promote market

integrity & investor protection

in the capital market.

CMSA

CMSA

TAX Full tax exemption

until 2016

Relevant tax incentives

(ICBU until 2016)

Relevant tax incentives (ICBU

until 2016)

Full tax exemption until 2016 N/A

STRUCTURE

FRAMEWORK

Subsidiary or branch Subsidiary / Stand alone Subsidiary / Stand alone Subsidiary

ISLAMIC PRIVATE BANKING: COMPARISON OF LICENSES – REQUIREMENTS FOR

PRUDENTIAL STANDARDS & BUSINESS SCOPE – cont’d

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