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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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