TMR: New rulings on Islamic banking raise concern

 

By Habhajan Singh

Islamic banks and takaful operators in Malaysia are now in the middle of its largest product migration to comply with a new set of legislation passed last year, with some quarters fearing there may be a flight of capital to the conventional banking side.

There is concern on the ground that some customers may return to conventional banking products if they are not comfortable with the new products to be released by the Islamic banks to comply with the requirements of the Islamic Financial Services Act (IFSA) 2013 [pdf version here].

A key focus for Islamic bankers at the moment is Bank Negara Malaysia’s (BNM) “restrictive” proposed guidelines for Shariah contracts used to structure savings, the mainstay of banks as they pool savings from customers and mobilise them for other productive purposes.

The specific concern, according to Islamic bankers who spoke to The Malaysian Reserve, is the ability for the banks to pay hibah, or gift, to holders of savings accounts structured under the Shariah principle of wadiah (custodian).

“The industry is still exploring the various options. Some changes to the proposed guidelines are required.

We will have to wait and see how this pans out. Until then, there is no real solution for the savings products,” said HSBC Amanah Malaysia Bhd CEO Rafe Haneef (picture).

Without the ability to pay hibah, the savings accounts may no longer be attractive to customers, unlike the savings accounts on the conventional side which promises them a certain amount of return.

CIMB Islamic Bank Bhd CEO Badlisyah Abdul Ghani said Shariah allows for the giving of gifts at the full discretion of the bank including under wadiah.

“Gifts are made by all Islamic banks in charity works, for staff welfares, for customer loyalty and for many other things. Wadiah with deposit customers is just one of many areas that we provide gifts or hibah.

“We are working with the regulator on the new exposure draft on wadiah and hibah to ensure that, for wadiah deposit products, they still function as they do now,” he said.

“Wadiah has been there for many years and has proven to be the best structure for an Islamic savings product. There will be enhancements to it, but I don’t think the hibah framework will be disallowed.”

Wadiah contract is a mechanism that enables a person to entrust his asset to another person for the purpose of safe keeping, according to the BNM ShariahResolution in Islamic Finance (2nd edition, 2010).

As a reward and token of appreciation for the utilisation of the deposit, the Islamic banking institution, at its discretion, may give hibah to the customer, it added. However, that may see some changes under a new draft exposure and its related guidelines now under review.

The central bank may provide some clarity on the issue when it releases the BNM Annual Report for 2013, scheduled for Wednesday.

On the fears of capital flight to the conventional side, industry sources acknowledge that there was a possibility, but do not expect it to be an issue of major concern. “If replacement of products is in place, then there should be no concern (for capital flight),” said Badlisyah.

It is understood that the central bank is also keeping an eye on the possibility of the capital flight, either among Islamic banks itself, or between the Islamic banking and the conventional banking systems, as Islamic banks start introducing their new products.

“At the moment, there is nothing significant,” said an industry source.

Under the leadership of BNM governor Tan Sri Dr Zeti Akhtar Aziz, the central bank has pushed forward for some major changes in the regulatory landscape of the nation’s financial system.

Aside from IFSA, the other major legislation is the introduction of the Financial Services Act 2013. Earlier, Parliament had also passed the Central Bank of Malaysia Act 2009, which had instituted some significant regulatory changes to the Islamic finance landscape in the country.

Shariah experts in the field of Islamic finance attest to the major changes that are happening, especially with the advent of the IFSA.

“It’s a big shift from what it was to what it’s going to be,” said Dr Mohamad Akram Laldin, the ED of International Shariah Research Academy for Islamic Finance, which was set up by BNM six years ago. He said investment products, for example, are going to behave differently from how it was in the past.

“Take mudarabah products. In the past, such investment products come with a guarantee on the capital. In future, under IFSA, that will no longer be the case. Capital will no longer be guaranteed. Investors must be willing to take the risk that they may lose their capital,” he said.

[THE MALAYSIAN RESERVE, 17 March 2014]

HSBC Amanah picks Rafe as chief, awaits BNM nod

By Habhajan Singh

HSBC Amanah Malaysia Bhd is said to have chosen a local Islamic banker to helm its operations while Maybank Islamic Bhd is casting its net wider, including the Middle East, in search for a potential new head for its operations.

Rafe Haneef, a promising local banker in the Islamic finance circle, has been tipped to take charge of the Islamic banking subsidiary of HSBC global banking group.

It is understood HSBC Amanah Malaysia is now awaiting for the green light from Bank Negara Malaysia (BNM), one of the steps any person must go through before they can be appointed as a chief executive at local banks and insurance companies, both sectors which come under the purview of the central bank.

"His move to Dubai is on hold for now with this new assignment," said one source.

Rafe, who was managing director of Dubai-based Islamic investment company Fajr Capital, had just taken up the position of managing director at HSBC Amanah, responsible for its global markets in Asia-Pacific, which would have required him to move to Dubai.

At Maybank Islamic, sources told The Malaysian Reserve that the largest Islamic banking player in Asia-Pacific asset size is "still on active pursuit" in its search for a potential new chief executive. "Wahid himself has met some candidates," one source said.

Maybank Islamic is the subsidiary of Malayan Banking Bhd headed by Datuk Seri Abdul Wahid Omar.

On Aug 23, this newspaper, quoting sources, reported Maybank Islamic was in the market to head-hunt for a new CEO to replace Ibrahim Hassan who will retire soon.

In the same report, HSBC Amanah Malaysia was also reported to be on the lookout for a new head as its executive director and CEO Musa Abdul Malek had opted for retirement.

A check on Rafe's profile found references of him having played a "leadership role" in developing sukuk and Islamic-structured and project finance since 1999 at HSBC, ABN AMRO and Citigroup. He was previously the head of Islamic banking for Citigroup Asia based in Kuala Lumpur. Then, he was also responsible for developing Malaysia as a regional Islamic finance hub for Citigroup and spread its Islamic business footprint across the region.

Prior to joining Citigroup, he established the Global Islamic Finance Department at ABN AMRO based in Dubai and was in charge of the Islamic wholesale and retail businesses for the group. Before that, he was with HSBC Amanah in London and Dubai focusing on Islamically-structured crossborder transactions and the sukuk market.

(This story appeared in The Malaysian Reserve on 8 September 2010. 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)

Two Islamic banks looking to hire CEOs

By Habhajan Singh
At least one local Islamic bank and a foreign bank's Islamic subsidiary is headhunting for new heads while another Islamic bank had recently axed its former acting chief executive officer.

Maybank Islamic Bhd and HSBC Amanah Malaysia Bhd are looking for new top guns while it is understood that Kuwait Finance House (Malaysia) Bhd had just recently axed a top official who had been on a long suspension.

Maybank Islamic, the Islamic arm of Malayan Banking Bhd which badges itself as the largest Islamic banking player in Asia-Pacific, is already headhunting for a new CEO to replace Ibrahim Hassan who will be retiring soon, say industry sources.

At HSBC Amanah Malaysia, the Islamic subsidiary of the global banking group should also be on the lookout for a new head as its executive director and CEO, Musa Abdul Malek had opted for retirement, though it could not be confirmed if they are looking outside the group.

"With the dearth of talent, it would be interesting to see how they fill these and other vacancies at the Islamic bank," said one Islamic bank official, who also highlighted the impending entry of the Islamic megabanks.

At KFH Malaysia, it is understood the Kuwaiti-owned Islamic bank had recently axed its former deputy CEO, Ab Jabbar Ab Rahman, who was also at the point the bank's acting CEO, after a long suspension and a domestic inquiry. It is understood that another KFH Malaysia senior bank official had also been axed.

However, Ab Jabbar could not be reached to confirm the latest events at the Islamic bank which had been mired with allegations of mismanagement. At Press time, it could not be confirmed if Ab Jabbar and the other top official were terminated or simply asked to leave after their contracts lapsed.

On March 29, The Malaysian Reserve had reported KFH Malaysia's then new boss Jamelah Jamaluddin, who came on board just under two months earlier, had directed more than a dozen staff to go on leave pending internal investigations into "transactions and contractual arrangements that have been undertaken over the years".

In an email response back then, Jamelah said the bank was "taking a proactive approach and conducting a due diligence status audit, in light of the different and more challenging economic environment". She added: "This is aimed at obtaining an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years. Some employees have taken leave to help facilitate the exercise and the bank will be guided by pragmatism and act accordingly as per the recommendations of the audit team conducting the due diligence status audit."

At KFH Malaysia, though, hiring is not the order of the day for the moment as the Islamic bank tries to recover lost ground after its recent debacle.

In November 2009, Rating Agency Malaysia had given it a negative outlook on the financial institution ratings due to the deterioration in the financial metrics of both the bank and its parents.

On Aug 3, Malaysian Rating Corp Bhd affirmed KFH Malaysia's long- and short-term financial institution ratings at AA+/MARC-1 while outlook on KFH's long-term rating was downgraded to negative from developing. Accordingly, it said KFH Malaysia's long-term rating outlook has been revised to negative from developing to reflect that of its parent.

(This story appeared in The Malaysian Reserve on 23 August 2010. 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)

HSBC Bank Malaysia announces new CEO

HSBC Bank Malaysia Bhd has announced the appointment Mukhtar Hussain as its new deputy chairman and CEO subject to regulatory and board approvals.
Mukhtar will succeed Irene M Dorner, who will embark on a new role as the president and CEO of HSBC Bank USA in early 2010.
Dorner has been in Malaysia since May 2007 and a key driver in the continued business success of HSBC Malaysia.
HSBC Malaysia said in a statement on Monday that Mukhtar has been with the HSBC Group since 1982. He has held a number of senior management positions both in London and the Middle East.
His recent roles have been as the global CEO of HSBC Amanah, the Islamic financial services division of HSBC and CEO of global banking and markets, Middle East and North Africa.
In his new position, Mukhtar will retain his dual role as global CEO of HSBC Amanah and, based in Kuala Lumpur, will continue to oversee the global expansion of this important business.
It is intended with this move that HSBC Group will continue to build an Islamic banking hub in Malaysia to reflect opportunities both domestically and internationally.

(This story appeared in The Malaysian Reserve on Oct 7, 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)

HSBC Amanah Takaful keen to maximise bancassurance ties

By Alfean Hardy
HSBC Amanah Takaful (Malaysia) Sdn Bhd is looking to maximise its bancassurance relationship with HSBC Bank Malaysia Bhd (HSBC Malaysia) in order to reach an internal target of contributing 20% to HSBC Amanah Malaysia Bhd's revenue by 2011, its executive director and chief executive officer Zainudin Ishak said.
Although part of the HSBC group in Malaysia, HSBC Amanah Takaful is 49% owned by HSBC Insurance (Asia Pacific) Holdings Ltd, 31% owned by Jerneh Asia Bhd and 20% owned by the Employees Provident Fund (EPF).
HSBC Amanah is a fully fledged Islamic bank and is a wholly owned subsidiary of HSBC Malaysia.
At a media briefing in Kuala Lumpur yesterday [May 19, 2009], Zainudin said the strategy going forward was to maximise its bancassurance model, which had already seen new premiums grow from RM15 million to RM30 million over the past six months.
"We need to do it well and unleash the full potential partnership with HSBC Malaysia and this will be our theme over the next three years," he added.
HSBC Amanah Takaful currently had access to HSBC Malaysia's 40 conventional branches as well as the four branches of HSBC Amanah nationwide.
Asked whether HSBC Amanah Takaful would take advantage of the recent liberalisation in the financial and insurance sectors and open branches of its own, Zainudin said there was no need.
"If you look at the bancassurance model, there's no real need for us to have a presence of our own independently," he said.
"We should leverage on the whole might of HSBC Malaysia without duplicating as it would involve costs to set up a branch.
The success of bancassurance is when you intertwine our product and the bank's products, which is our direction going forward," he added. To a question about having bancassurance distribution agreements with other parties aside from HSBC Malaysia, Zainudin said HSBC Amanah Takaful was open to opportunities but it was not a priority for the Islamic insurer.
"It's important for us, as a startup, to maximise our bancassurance potential with HSBC Malaysia and we don't want to distract our focus by getting into other forms of relationship at the moment. But if the need is there or if opportunities arise, we will do a proper evaluation on that," he added.

(This story appeared in The Malaysian Reserve on May 20, 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)

HSBC plans more Islamic banking branches: THE STAR

By SHARIDAN M. ALI
SHAH ALAM: HSBC Bank Malaysia Bhd plans to open more Islamic banking branches under its unit HSBC Amanah Malaysia Bhd this year after carrying out a post-implementation review on its four branches.
“There are plans to increase our branches this year but, more importantly, we have to review our existing four branches so that we can avoid any possible hiccups and improve our future undertakings.
“We are in the midst of identifying the location for our future branches,” HSBC Amanah executive director Musa Abdul Malek said after the official opening of the company’s latest branch in Shah Alam yesterday [May 12, 2009].
Irene M. Dorner and Shah Alam mayor Mazalan Md Noor at the launch of HSBC Amanah branch in Shah Alam
HSBC Amanah also has branches in 1Utama Shopping Centre, Ampang Point and Juru Auto City in Penang.
Chairman Irene M. Dorner said the Shah Alam branch hoped to have at least 3,000 customers by year-end. “It now has about 300 customers since it started operations three weeks ago,” she said.
Islamic banking contributed about 10.5%, or RM257.9mil, to HSBC Bank Malaysia’s total operating income for the financial year ended Dec 31.
HSBC Amanah, which was formed as HSBC Bank Malaysia’s Islamic banking subsidiary in February last year, recorded a net profit of RM22.7mil from February to December 2008.
HSBC Amanah’s total shareholders fund stood at RM683.8mil as at Dec 31.

(The Star, Wednesday May 13, 2009)

M'sian scholars at HSBC global meet

Two Malaysian Shariah scholars took part in HSBC Amanah's third bi-annual meeting of its Global Shariah Advisory Board in Makkah recently. Dr Mohammed Daud Bakar and Dr Mohammad Akram Laldin, two familiar names in the Malaysian Islamic finance scene, sit on the HSBC Amanah's global board chaired by renowned Pakistani retired Supreme Court judge Sheikh Muhammad Taqi Usmani.
The meeting earlier this month was part of the international bank's continuous efforts to engage both Islamic scholars and bankers in a constructive dialogue about pressing issues and the challenges facing Islamic finance, HSBC Amanah said in a statement. HSBC Amanah is a global Islamic banking division of the HSBC Group. In Malaysia, it has set-up a wholly-owned subsidiary HSBC Amanah Malaysia Bhd when it received Bank Negara Malaysia's (BNM) approval to run an Islamic bank.