Labuan Islamic Investment Banking
Labuan Islamic investment banking is defined as:

  • the business of providing financing facilities in accordance with Shariah principles
  • the business of providing consultancy and advisory services relating to corporate and investment matters including dealing in securities, or making and managing investments on behalf of any person in compliance with Shariah principles
  • the business of undertaking foreign exchange transactions, profit rate swaps, dealings in Islamic derivative instruments or Islamic derivative financial instruments which are in compliance with Shariah principles or any other similar risk management activities
  • Labuan Islamic financial business, or
  • such other business as Labuan FSA may specify, with the approval of the Minister of Finance, in any currency (including in Malaysian Ringgit where permitted by the Financial Services Act 2013 or such other relevant law in force).
Labuan Islamic investment banks are not allowed to accept deposits.
  • A Labuan Islamic investment bank can be set up as a branch or subsidiary and registered or incorporated under the Labuan Companies Act 1990. The application may be accepted from:
    1. An investment bank or group engaging in investment banking activities licensed by the regulatory authority in the country of origin
    2. A licensed bank or an established financial institution or financial service provider supervised by a competent regulatory authority
    3. Any institutions licensed under the Financial Services Act 2013 with prior approval from Bank Negara Malaysia; and
    4. Corporations with the necessary expertise and experience in the financial industry with at least three years’ good track record and regulated by an authority in their home country.
  • An applicant is required to submit an application of which the submission should include the following:
    1. A letter of awareness from a competent regulatory authority that supervises the applicant's shareholder/head office.
    2. A letter of guarantee from the applicant's shareholder or an undertaking from the head office.
    3. Business plans inclusive of three years' financial projections of the applicant.
    4. Certified true copy of the Memorandum and Articles of Association of the applicant.
    5. Certified true copy of the resolutions of the board or minutes of the general meeting, which approve the applicant to apply for a licence.
    6. Copy of the audited annual accounts of the applicant's shareholder/head office for the three preceding years.
    7. Applicant's corporate profile, which includes:
      • The name, place and date of establishment of the applicant.
      • The names, addresses, qualifications and experience of the directors and officers responsible for the overall management of the affairs of the applicant.
      • The name and address of each member who holds 10% or more of the voting shares of the applicant.
    8. Declaration by the applicant on the probity of its directors and officers who are responsible for the management of the applicant.
    9. Information on its own internal Shariah Advisory Board (SAB).
    10. Any other information relevant to the application.
      • Maintain a physical presence in Labuan.
      • Every director or principal officer (PO) of a Labuan Islamic investment bank must be fit and proper persons and shall not be subject of any adverse report from any reliable sources. The appointment of a director or PO of a Labuan Islamic investment bank must obtain prior approval from Labuan FSA.
      • Comply with the statutory requirements under the Labuan Islamic Financial Services and Securities Act 2010.
      • Comply with the prudential and reporting requirements issued by Labuan FSA.
      • Adhere to any other requirements issued by Labuan FSA from time to time.
      • Meet certain pre-determined criteria, should it prefer to co-locate to any other parts of Malaysia.
    2. All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year:
      Type of Fees
      Amount
      Annual Fee
      RM100,000
      USD30,000
      Marketing Office Fee
      RM7,500
      USD2,500
      Co-Located Office Fee
      RM10,000
      USD3,500
    Additional Incentives
    Under the Malaysia International Islamic Financial Centre's (MIFC) initiative, Labuan Islamic investment banks are given greater flexibility as follows:
    1. Exemption from maintaining physical presence in Labuan. The Labuan Islamic investment banks may open operations offices anywhere in Malaysia, subject to consideration by Labuan FSA.
    2. No limitation on the staffing and number of operations offices to be opened outside Labuan.
    3. The operations offices are to conduct Islamic financial business in non-Ringgit currencies and deal mainly with non-residents as per Labuan legislation.
    Dealings with residents in non-Ringgit transactions are allowed as permitted under the current foreign exchange administration policies.
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