Labuan Islamic Bank

Labuan Islamic business is the business of receiving deposits on current account, deposit account, saving account or any other account in compliance with Shariah principles as may be specified by The Authority, conduct Labuan Islamic financial business as defined under Section 60 of Labuan Islamic Financial Services and Securities Act 2010 including the following business in compliance with Shariah principles:

  • Islamic building credit business
  • Islamic credit token business
  • Islamic development finance business
  • Islamic leasing business
  • Islamic factoring business
  • Islamic money-brokering business
  • Such other business as Labuan FSA may specify, with the approval of the Minister of Finance

Entry Requirement

An applicant should meet the following minimum eligibility criteria:

  1. Must be a bank or financial institution
  2. Possesses a sound track record
  3. Accorded a good credit rating by acceptable rating agencies
  4. Supervised by a competent regulatory authority; and
  5. Conforms to generally accepted standards of international banking practices or the Bank for International Settlements (BIS), as the case may be.

Labuan Islamic Investment Bank

Labuan Islamic investment banks are allowed to operate as full-fledged Islamic banks except accepting deposits. The followings are the range of businesses allowed to be undertaken by a Labuan Islamic investment banks:

  • Providing financing facilities in compliance with Shariah principles
  • 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
  • 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
  • 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.

Entry Requirement

  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 licensed institutions under the Banking and Financial Institutions Act 1969 (BAFIA) with prior approval of Bank Negara Malaysia
  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.

Additional Incentives

Under the Malaysia International Islamic Financial Centre’s (MIFC) initiative, Labuan Islamic banks and investment banks are given greater flexibility as follows:

  1. Exemption from maintaining physical presence in Labuan. The Labuan Islamic 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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