IslamicFinance.de

Malaysia-based International Islamic Liquidity Management Corp (IILM) will reissue $860 million of its three-month Islamic bond next week, after expanding its issuance programme to $1.35 billion in January. The auction of the three-month sukuk, rated A-1 by Standard and Poor's, will be conducted on Apr. 17. In February, the IILM sold $490 million worth of three-month paper, designed to meet a shortage of highly liquid, investment-grade financial instruments which Islamic banks can trade to manage their short-term funding needs.

RAM Ratings said the Malaysian Islamic banking industry’s assets have almost doubled in the last five years, expanding to RM423bil as at end-February 2014 and accounting for 21% of the banking system’s assets. Gross financing continued to outpace deposits last year. In terms of asset quality, RAM said the the Islamic banking system’s gross impaired-financing (GIF) ratio stood low at 1.4% as at end-February 2014. RAM noted Islamic banks in Malaysia are well capitalised, with common-equity tier-1, tier-1 and total capital ratios of 12.5%, 12.5% and 14.7%, respectively, as at end-February 2014. The gradual derecognition of Basel II securities as qualifying capital, besides being an alternative source of long-term funding, will support the issuance of Basel III-compliant capital instruments for Islamic banks in Malaysia.

Etiqa Takaful Bhd, Malaysia's largest Islamic insurance provider and a unit of Malayan Banking Bhd, will issue a sukuk to raise 300 million Malaysian ringgit ($91.39 million). Etiqa is supported by a strong liquidity position although its family takaful business has seen poor growth due to unattractive pricing and a limited portfolio.

The Securities Commission Malaysia (SC) and the Oxford Centre for Islamic Studies (OCIS) co-hosted the 5th annual Roundtable on Islamic Finance in Kuala Lumpur on March 22 and 23. The roundtable, themed ’Harnessing Waqf Into a Bankable Social Financing and Investment Asset Class’ discussed the development of waqf and how it can contribute towards broadening the Islamic finance industry globally. Industry practitioners and scholars from around the world gathered to discuss challenges and potential of waqf in the philanthropic spheres, including issues of legislation, governance and professionalism, and capital. The global effort to harness Waqf into a bankable social financing and investment asset class is also in line with the SC’s strategy to identify new growth segments to further internationalise Malaysia.

Dubai's Tecom Investments has sent a delegation from Dubai’s Knowledge Village and Dubai International Academic City to meet representatives from Islamic finance academic institutions in Malaysia in an effort to bring some them to the emirate. The delegation examined different Islamic economics courses related to Sharia-compliant funds, sukuk, murabaha and the regulatory frameworks related to Islamic finance. Dubai aims to bring two renowned Islamic finance universities to the city – the International Islamic University Malaysia and The Global University of Islamic Finance. It is also keen to bring in governmental professional development centres such as the Islamic Banking and Finance Institute Malaysia. The delegation also visited the Labuan International Business and Finance Centre, which has a research focus on Islamic wealth management.

Cagamas, the Malaysian mortgage corporation, has issued RM500 million three-month Islamic commercial papers (ICPs), its first ICP for the year. Proceeds from the murabahah ICPs will be used to fund the purchase of Islamic financing from the financial system. Investors' preference for high grade issues and short duration investment strategy results in strong demand for the company's three-month ICPs particularly from financial institutions with a bid to cover ratio of over 2.4 times and competitively priced at three-month KLIBOR. The ICPs, which will be redeemed at their full nominal value on maturity, will be listed and tradable under the Scripless Securities Trading System.

Islamic banks are required to reclassify their deposits into Islamic deposits and investment accounts under the Islamic Financial Services Act 2013 (IFSA). To do so, they are given a two-year transition period until June 30, 2015. Bank Negara Malaysia (BNM) said Islamic banking institutions will engage with their customers in providing information and clarification on the differences between the Islamic deposit and investment account products as well as the options available to them to either retain their placements in Islamic deposit or migrate to investment accounts. During the transition period, all lslamic deposits accepted under IBA will continue to be protected by Perbadanan Insurans Deposit Malaysia while the Islamic banks will also ensure that the customers' rights are protected.

Japan’s three-biggest lenders have won licenses to offer Islamic banking services in Malaysia. Sumitomo Mitsui Banking Corp Malaysia Bhd obtained approval to operate in the Southeast Asian nation on February 10. The lender expects to provide foreign-currency financing to local companies in the form of Murabaha and commodity. Bank of Tokyo-Mitsubishi UFJ Malaysia Bhd offers Islamic loans and guarantees among its services after obtaining approval in 2008, while Mizuho Financial Group Inc provides Shariah trade financing since getting a license in 2012. Japanese entities have also chosen Malaysia as a place to raise funds via the Islamic debt market.

A cooperation agreement between the bourses of Malaysia and Saudi Arabia – the world's two largest Islamic financial services markets – stands to help the industry grow at a greater clip in both countries. The deal, signed on February 20, will see the exchanges in Kuala Lumpur and Riyadh share expertise and develop human resources jointly. It covers topics such as equities, mutual funds and sukuk. Combined, Malaysia and Saudi Arabia hold $682bn in Islamic banking assets. The Saudi exchange, Tadawul, lists the world’s biggest Islamic banks, while Bursa Malaysia hosts the largest and most liquid market for sukuk.

Malaysia’s Islamic banking assets are on track to make up 40% of the country’s total banking sector assets by 2020 from about 25% now, according to Wasim Saifi, Standard Chartered Saadiq Bhd chief executive officer and global head of Standard Chartered’s Islamic consumer banking. Islamic banking has grown twice as fast in Malaysia as its conventional counterpart at a compounded annual growth rate of 22%. Syariah-compliant solutions are currently offered at 10 Standard Chartered Saadiq branches, but will now also be available via the Islamic banking counters at Standard Chartered Bank Malaysia’s conventional branches. Standard Chartered Saadiq is also targeting to penetrate further into the SME market.

Tan Sri Khalid Ibrahim has denied allegations of a link between his recent settlement with Bank Islam Malaysia Berhad (BIMB) over a RM66 million loan and a controversial water restructuring agreement between Selangor and Putrajaya. Last month, Khalid told The Malay Mail Online he had reached an out-of-court settlement with BIMB over a US$18.52 million (RM66.67 million) loan settlement suit, without compromising PKR or the PR coalition. He declined to give further details but it is understood that the settlement was for an amount much lower than RM66.67 million. The hastily signed MoU on the water restructuring plans between Selangor and Putrajaya has added to the intrigue surrounding the March 23 Kajang by-election, with some PKR leaders questioning the timing of the deal and Khalid’s suit settlement.

Standalone Islamic bank versus Islamic window operations is the most prolific debates found in the Islamic finance industry today. The debate is healthy and worthwhile having, if it is done merely to determine how to best meet the various stakeholders’ expectations in a particular jurisdiction. However, it becomes totally time wasting if it is done on the basis of determining which one is more credible or “more Shariah-compliant”. Malaysia is pretty much the only country in the world that has comprehensively legislated and regulated how financial institution may provide Islamic banking products and services. In a jurisdiction, however, that does not have such a structured and established framework, banks must operate within the existing banking framework. Standalone Islamic bank or Islamic window, both are equally good and credible.

In 2007, Selangor Menteri Besar Khalid Ibrahim initiated a suit against Bank Islam seeking damages from the bank for alleged wrongful sale of his shares in Guthrie. Bank Islam then filed a counter suit to recover RM66.67 million claiming that Khalid’s failure to repay his loan. Twice the High Court ordered Khalid to pay the RM66.67 million in summary judgments obtained by Bank Islam. And then this year, Bank Islam withdrew its legal challenge to recover the RM66.67 million from Khalid to allow for an out of court settlement. Among the questions being raised is how Khalid has managed to get Bank Islam to agree to an out-of-court settlement. A point to note is that negotiations for the settlement are still in progress with a decision expected to be announced shortly.

AMMB Holdings has announced that its Islamic banking arm, AmIslamic Bank has on 28 February 2014 successfully issued its inaugural issuance of RM200.0 million Basel III-compliant Tier 2 Subordinated Sukuk Murabahah. The issuance is also Malaysia's first Basel III-compliant Tier 2 Subordinated Sukuk issuance and the world's first Basel III-compliant Tier 2 Subordinated Sukuk to be issued under the Shariah principle of Murabahah based on commodity trading (via a Tawarruq arrangement).

The sharia compliant arm of Malaysia-based Public Bank has submitted a proposal to the central bank for a 5 billion ringgit ($1.5 billion) Basel-III compliant Islamic bond program. Public Islamic Bank, a wholly-owned unit of Public Bank, may emerge as the third issuer of Basel III compliant sukuk. AmIslamic, which established a Basel III compliant sukuk program for 3 billion ringgit on Feb 13, sold 200 million ringgit on Wednesday. RHB Capital received approval from the securities commission for a similar 1 billion ringgit program earlier this month. Besides, the country's conventional banks have begun issuing Basel III bonds; Public Bank issued medium-term notes worth 1 billion Malaysian ringgit last September.

he High Court fixed case management on March 18 to allow possible settlement between Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim and Bank Islam Malaysia over two suits linked to a RM66.67 million loan to purchase Guthrie shares 13 years ago. According to Khalid's counsel S. Selvarajah, his client and Bank Islam are seeking to reach a global settlement over the matter. In 2007, Khalid had filed a suit against the bank to seek a declaration that the Al-Bai Bithaman Ajil(BBA) facility entered between them in 2001 was null and void. Khalid also sought a declaration that Bank Islam had breached the collateral contract and the BBA facility. Bank Islam then countersued Khalid, claiming that Khalid had breached its contract in the loan agreement over his purchase of the Guthrie shares.

Export-Import Bank Malaysia (Exim Bank) has established a RM3.3 billion (US$1 billion) Multicurrency Sukuk Issuance Programme under the special purpose vehicle, Export- Import Sukuk Malaysia. On Feb 19, 2014, the first sukuk series from the programme was issued. A hybrid structure was decided upon on the basis of wakala principle. The Exim Bank sukuk received strong investor demand. It was oversubscribed by approximately 10 times attracting approximately US$3.2 billion orders. The strong demand from the investors allowed the sukuk to be priced at the tighter end of final price guidance at T+140 bps following an initial price guidance of T+165 bps area, which is equivalent to an all-in yield of 2.87% per annum.

Fitch Ratings has assigned Export Import Bank of Malaysia's (MEXIM) USD300m 2.874% sukuk due 2019 a final rating of 'A-'. The Islamic bonds are issued under MEXIM's USD1bn multi-currency sukuk programme established through EXIM Sukuk Malaysia. The sukuk rating is the same as MEXIM's Long-Term Issuer Default Rating (IDR). EXIM Sukuk Malaysia, a special purpose vehicle (SPV) incorporated solely to facilitate sukuk issues, will use the sukuk proceeds to purchase eligible assets from MEXIM. However, any deterioration in the Malaysian sovereign's creditworthiness and ratings or in the government's propensity to support MEXIM would hurt the IDR and hence the sukuk rating.

AmIslamic Bank, subsidiary of AMMB Holdings, has received the necessary approvals from both Bank Negara Malaysia and the Securities Commission of Malaysia to set up a subordinated Sukuk Murabahah programme with a value of RM3bn. The subordinated Sukuk Murabahah programme has a tenor of up to 30 years from the date of issue and each tranche will have a tenor of five years minimum. In a market filing the issuer said that RAM Rating Services had assigned a preliminary long-term rating of 'AA3' to the Subordinated Sukuk Murabahah under the programme.

The Malaysia-based International Islamic Liquidity Management Corp (IILM) will issue a $490 million three-month Islamic bond next week, after expanding its issuance programme to $1.35 billion in January. The auction of the three-month sukuk, rated A-1 by Standard and Poor's, will be conducted on Feb. 25. Last month, the IILM sold $860 million worth of three-month paper, designed to meet a shortage of highly liquid, investment-grade financial instruments for the short-term funding needs of Islamic banks. Since the programme's launch, primary dealers have held on to the IILM instruments after auction and there has been little if any secondary market trade in them.