Bank Negara Malaysia grants two mega Islamic banking licenses

Malaysia opens its doors to international banking as it implements liberalisation measures over the period 2009 to 2012.

Bank Negara Malaysia (BNM), the central bank, has given two conditional licenses to separate parties to establish mega Islamic banks in the country. BNM Gov. Zeti Akhtar Aziz confirmed that one of the conditional licenses is likely to be converted into a full license by the end of 2010, with the second one to follow by the end of the first half in 2011.

Zeti did not identify the parties involved nor the countries of domicile of the main shareholders, suffice to say they are not Malaysian. "This is final jigsaw to our financial system. Under the Malaysia International Islamic Financial Center (MIFC) Initiative we went to promote international business. The conditions of authorization for these mega banks are very demanding. Not only must they have a minimum $1 billion paid up capital which is very significant, but they must also have a top management team based on the fit and proper criteria and a business plan that can justify the capital.

"We have identified two parties who are making preparations in concrete terms in their submissions to us. It is likely that we would announce the issuance of the first (full) license by the end of this year. These banks would engage in some retail business but the focus is international business. These licenses would also promote our linkages around the world -- not only with the Middle East and Africa, but also with Europe and the US," she explained.

View the full story in Trading Markets.