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LABUAN BANKING BUSINESS

 

Labuan Banking Business Info

A. Introduction

 

 

As much as half of the world’s capital is estimated to flow through international business and financial centres, making banking the most important activity in these centres. Labuan IBFC offers a wholesale platform for banks and financial intermediaries looking to establish their operations and take advantage of the numerous associated opportunities in the region. Labuan IBFC is also bound by an effective regulatory regime that subscribes to internationally-recognised standards and best practices in financial services and prudential regulation. Labuan banks and investment banks operating out of Labuan IBFC provide a host of services, conventional as well as Islamic to cater to the growing demand from investors both domestic and international.

 

 

B. Labuan Banking

 

 

Pursuant to Section 86 of Labuan Financial Services and Securities Act 2010 a “Labuan Banking Business” means;

 

  • the business of receiving deposits on current account, deposit account, savings account or any other accounts may be specified by the Authority;

 

  • Labuan investment banking business;

 

  • Labuan financial business;

 

  • Labuan Islamic banking business;

 

  • Such other business as the Authority, with the approval the Minister of Finance, in any currency (including in Malaysian Ringgit where permitted under the Financial Services Act 2013 or such other relevant law in force).

 

 

C. Labuan Banking Entry Requirements

 

 

An applicant should meet the following minimum eligibility criteria:

 

  • Must be a bank or financial institution

  • Possesses a sound track record

  • Accorded a good credit rating by acceptable rating agencies

  • Supervised by a competent regulatory authority; and

  • Conforms to generally accepted standards of international banking practices or the Bank for International Settlements (BIS), as the case may be.

 

 

D. Application Requirements

 

 

An applicant is required to submit an 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 audited annual accounts of the applicant's shareholder/head office for the three preceding years.

  • 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; and​

  • Any other information relevant to the application

 

 

E. Operational Requirements

 

 

  • Maintain a physical presence in Labuan.

  • Every director or principal officer (PO) of a Labuan bank must be fit and proper persons and shall not be subject of any adverse report from any reliable sources. The appointment of a director or PO of a Labuan bank must obtain prior approval from Labuan FSA.

  • Comply with the statutory requirements under the Labuan 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 of Malaysia

 

 

F. Payable Fees

 

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

 

Type of Fees                             Amount

 

Annual Fee                                RM 100,000 (USD30,000)

Marketing Office Fee                 RM 7,500     (USD2,500)

Co-Located Office Fee              RM 10,000   (USD3,500)

 

 

C. Labuan Islamic Banking Windows

 

 

The setting up of an Islamic banking window by a Labuan bank under the Labuan Financial Services and Securities Act 2010 does not require a separate licence and there is also no additional licence fee involved. A Labuan bank may submit the application for approval with the following documents:

 

  • Certified true copy of board resolution pertaining to the proposed establishment of an Islamic banking window.

  • Business plan inclusive of three years' financial projections.

  • Information on its own internal Shariah Advisory Board (SAB).

  • Additional Incentives

 

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

 

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

  4. Dealings with residents in non-Ringgit transactions are allowed as permitted under the current foreign exchange administration policies.

 

 

 

Our dedicated teams are more than happy to assist you in establishing, structuring and planning your Labuan Bank establishment and licensing application. Contact us today at info@zrctrust.com for free initial consultation without any obligation.

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