Labuan Islamic Investment Bank

Labuan Islamic investment banking is defined as the business of providing financing facilities 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, 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 ringgit where permitted by the Exchange Control Act 1953 or such other relevant law in force).

Labuan Islamic investment banks are not allowed to accept deposits.

Entry Requirements

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:

• An investment bank or group engaging in investment banking activities licensed by the regulatory authority in the country of origin;
• A licensed bank or an established financial institution or financial service provider supervised by a competent regulatory authority;
• Any licensed institutions under BAFIA with prior approval of Bank Negara Malaysia; and
• Corporations with the necessary expertise and experience in financial industry with at least three years good track records and regulated by an Authority in their home countries.

Application Requirements

An applicant is required to submit application of which the submission should include the following:

• A letter of awareness from a competent regulatory authority that supervises the applicant's shareholder/head office.
• A letter of guarantee from the applicant's shareholder or an undertaking from the head office.
• Business plans inclusive of three years' financial projections of the applicant.
• Certified true copy of the Memorandum and Articles of Association of the applicant.
• Certified true copy of the resolutions of the Board or minutes of the general meeting which approve the applicant to apply for a licence.
• Copy of the applicant's shareholder/head office audited annual accounts for the three preceding years.
• A minimum paid-up capital amounting to RM10.0 million equivalents in any foreign currency.
• 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.
  • Declaration by the applicant on the probity of its directors and officers who are responsible for the management of the applicant.
• Information on its own internal Shariah Advisory Board (SAB). The applicant may also opt to appoint Labuan FSA's Shariah Supervisory Council as its own SAB
• Any other information relevant to the application.

Operational Requirement

• Maintain a physical presence in Labuan.
• Every director or Principal Officer (PO) of a Labuan Islamic investment bank must be of fit and proper persons and shall not be subjected to any adverse report from any reliable sources. The appointment of 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 in Malaysia.

Additional Incentives

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

• Exemption from maintaining physical presence in Labuan. The Labuan Islamic investment banks may open operation offices anywhere in Malaysia, subject to consideration by Labuan FSA and approval by Minister of Finance.
• No limitation on the staffing and number of operations offices to be opened outside Labuan.
• The operation offices are to conduct non-ringgit Islamic financial business and deal mainly with non-residents as per Labuan legislation.
• Dealing with residents in non-ringgit transactions are allowed as permitted under the current foreign exchange administration policies.

Fees

All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year:

Governing Legislation

Labuan Islamic Financial Services and Securities Act 2010
Labuan Companies Act 1990
Labuan Business Activity Tax Act 1990

For a complete list of all Labuan laws, please click here.

Related Guidelines / Circulars

Guidelines on Investment Banking Business
Guidelines on Corporate Governance for Labuan Banks
Guidelines on Fit and Proper Person
Guidelines on Co-Location of Labuan Banks