By Lee Cherng Wee
Several financial institutions from the Middle East and Western countries have shown interests in setting up Islamic banks in Malaysia, according to Bank Negara Malaysia (BNM).
"We received several enquiries and had discussions on the process of submitting the applications. The closing date is in October," said BNM governor Tan Sri Dr Zeti Akhtar Aziz in a press conference after opening the Malaysia-UK Islamic Finance Forum yesterday.
In April, under the liberalisation of the financial sector, the government offered two new mega Islamic banking licences to foreign players with minimum paid-up capital of US$1 billion (RM3.54 billion).
Zeti added that out of the enquirers, two have stated their intention to partner local financial institutions. Earlier in her opening speech, Zeti noted that Islamic financial assets account for 17% of total assets of the local banking system and the daily average volume transacted in Malaysia’s Islamic money market is RM6 billion.
When asked about the interest rate, the governor said current interest rates is at an appropriate level but does not rule out a further rate cut due to uncertainties in the external environment.
"We see our domestic economic conditions being stable and certain sectors show a t rend towards posit ive growth, but the external environment remains very uncertain, therefore from time to time we will review the outlook particularly the external environment and from there we will decide on the interestrate policy," she said.
On the economy, Zeti said the second quarter performance will be similar to the first quarter with improvement expected in the second half of this year.
The government’s stimulus package has been aggressively implemented and the central bank expects to see the effects in the third and fourth quarters, she added.
"We have never relied on the exchange rate to gain competitiveness. In the immediate and short term we see volatility in our exchange rate, just like we see volatility in the major currencies in the international financial system that is determined by financial flows across borders.
"However, over the medium term our exchange rate will continue to reflect our underlying fundamentals and as our underlying fundamentals are expected to improve then the currency can also be expected to strengthen gradually overtime," said Zeti when commenting on the ringgit.
(This story appeared in The Malaysian Reserve on July 9, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
