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Overview of ibfc banking biz


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Overview of ibfc banking biz

  1. 1. Overview ofLabuan IBFCBanking BusinessMay 2012Labuan Federal Territory, Malaysia.
  2. 2. Contents of Presentation1 Role of Labuan FSA2 Overview of Labuan IBFC Business3 Q&A
  3. 3. Labuan FSA: Objective Labuan Financial Services Authority (Labuan FSA), formerly known as Labuan Offshore Financial Services Authority (LOFSA), was established on 15 February 1996 under the Labuan Financial Services Authority Act 1996. • Labuan FSA is the statutory body responsible for the development and administration of the Labuan International Business and Financial Centre (Labuan IBFC). • Under the government’s vision to position Labuan as a progressive and an integrated financial centre catering for the Asia-Pacific market, the activities of the Labuan FSA are guided by the following objectives:-  to promote and develop Labuan as an international centre for business and financial services;  to develop national objectives, policies and priorities for the orderly development and administration of the international business and financial services in Labuan; and  to act as the central regulatory, supervisory and enforcement authority of the international business and financial services industry in Labuan.
  4. 4. Labuan FSA: One-stop Regulatory Agency  Incorporate/  License &  License & register Labuan supervise Labuan supervise fundSince 1996 companies banks managers  License and  License &  Register funds supervise trust supervise Labuan  Approval of & management insurance & bonds issuance companies insurance related  Regulate LFX companies Labuan FSA (established in 1996) Companies Bank Negara Securities Prior to 1996 Commission of Malaysia Commission Malaysia
  5. 5. Labuan FSA : Members of Authority i. Representing Regulatory Authorities Tan Sri Dato’ Sri Dr. Zeti Akhtar Aziz Governor, Central Bank of Malaysia (Chairman) Datuk Ranjit Ajit Singh Y. Bhg. Dato’ Siti Halimah bt. Chairman, Ismail Securities Commission Ministry of Finance Malaysia Encik Ahmad Hizzad Baharuddin Encik Zainal Abidin Abdullah Director-General of Labuan FSA CEO, Labuan Corporation Encik Mohd Naim Daruwish CEO, Companies Commission of Malaysia
  6. 6. Labuan FSA: Members of Authority …..contd ii. Representing Private Sector Datuk Ali Abdul Kadir Chairman, Jobstreet Corp, Milux Corp, Microlink Solution, Privisia Technology Bhd & Financial Reporting Foundation Dato’ Mohammed Azlan Hashim Chairman, D & O Green Technologies Bhd, SILK Holdings Bhd and Labuan IBFC Inc Sdn Bhd Datuk Oh Chong Peng Chairman, Alliance Financial Group Bhd
  7. 7. Labuan FSA:International Advisory Panel (IAP) Dato’ Mohammed Azlan Hashim Iqbal Khan Chairman of IAP Founding Director & CEO of Fajr Capital Dato’ Seri Ahmad Johan Mohammad Raslan Tan Sri Dato’ Megat Zaharuddin Megat Executive Chairman of Mohd Nor PricewaterhouseCoopers, Malaysia Chairman of Malayan Banking Bhd Anthony Neoh Senior Member of the Hong Kong Bar Michael Troth Region Head, Citi Trust in Asia Pacific Datuk George Ratilal Other IAP members: Executive Vice President (Finance) of • Mr Baron Frederik van Tuyll, MD of Equity Trust PETRONAS • Datuk Wira Jalilah Baba, Group Chairman of PKT Logistics Group S/B, Former DG of Malaysia Investment Development Authority (MIDA) • Mr Frank McInerney, GM of General Reinsurance AG’s Singapore
  8. 8. Labuan FSA:The Shariah Supervisory Council Dr. Mohd Daud Bakar (Chairman) President/Chief Executive Office Dr. Hussain Hamed Hassan International Institute of Islamic Finance Chairman of Dubai Islamic Bank’s Fatwa Inc. and Chairman of the SAC of BNM & & Shariah Supervision Board, UAE SC of Malaysia Dato’ Dr. Abdul Halim Haji Ismail (Deputy Dr. Mohamed Ali Elgari Chairman) Former Professor of Islamic Economics Member of Shariah Councils of BNM and King Abdul Aziz University, Jeddah SC of Malaysia Professor Madya Dr. Ahmad Shahbari @ Dr. Engku Rabiah Adawiah Engku Ali Sobri Salamon Associate Professor Chairman of the Shariah Advisory Board International Islamic University, Malaysia of Syarikat Takaful Malaysia Berhad.
  9. 9. Labuan FSA: Organisation Structure Ministry of Finance Audit and Risk Advisory Committee Members of Authority Management Committee •International Advisory Panel (IAP) •Shariah Supervisory Council (SSC) Director-General Audit Department Deputy Director-General Risk Management Unit Corporate Business Supervision and Corporate Strategic Affairs Management Enforcement Services Development Department Department Department Department Department •Corporate •Business • Banking •Finance •Policy and Communication Operations •Facility Business and Event •Insurance Management Development Management •ROC •Capital Market •ICT •Tax Strategy •External •Market Relations Surveillance •Anti-Money •Labuan and Laundering and International •Corporate Compliance Prosecution School and Secretarial and Subsidiaries Performance •Legal Services •Industry Management Reporting •HR
  10. 10. Overview of Labuan IBFC Business
  11. 11. Labuan : As an IOFC on 1 Oct 1990… Labuan IOFC Established In Oct 1990 Rebranded in Jan 2008 Complement Develop economy of Kuala Lumpur as Labuan and contribution a regional to the growth of the financial centre nationFocus area since 2011 – 2020 - Strengthening regional and internationalfinancial integration
  12. 12. International Financial Centre Definition An offshore financial centre (or OFC), although not precisely defined, is usually a low-tax, lightly regulated jurisdiction which specializes in providing the corporate and commercial infrastructure to facilitate the use of that jurisdiction for the formation of offshore companies and for the investment of offshore funds. From Wikipedia
  13. 13. Why International Financial Centre? 1. Cost effective and most efficient mean of doing business 2. Product innovation to enhance return of investments 3. Well-regulated and comply with international standard and best practices 4. Niche products not available in domestic market
  14. 14. Labuan is one of more than 70 InternationalFinancial Centres in the World Irish Republic Dubai Isle of Alderney Ireland Man Guernsey Netherlands Thailand Dublin Labuan Jersey Luxembourg Hong Kong Liechtenstein Austria Switzerland Cyprus Andorra Israel Bermuda Gibraltar Bahrain Bahamas Madeira Marshall Islands Turks & Caicos Is. Canary Is. Nauru Cayman Is. Belize VanuatuAruba Liberia Qatar Costa Monaco Western Samoa Rica Malta Singapore Cook Island Panama Jordan Antigua Uruguay Antilles British Virgin Djibouti Is. Seychelles Anguilla St. Kitts St. Vincent & Mauritius Nevis Grenadines Barbados
  15. 15. Labuan IBFC : Labuan vs Domestic Cos Labuan Companies Domestic Companies Labuan FSA Regulatory Body SSM Labuan Companies Governing Law Companies Act of Act 1990 Malaysia 1965 100% non-resident At least 30% allowed Ownership bumiputera (applicable Min 1 shareholder for government project only ) No min capital Min 2 shareholders Min RM2 capital LBATA : 3% or Taxation ITA : 25% RM20,000 Non-ringgit Currency Ringgit
  16. 16. Labuan IBFC : Business Activities Labuan Labuan Trust Capital Labuan Banking Insurance Companies Market Companies •Life/General •Trustee •Labuan •Registration of•Wholesale International Companies Banking •Broking •Administrator Financial •Investment•Loans/Deposit •Underwriting •Secretarial Exchange (LFX) Holding •Trading•Guarantees •Captives • Private/Public - Listing / •SPVs Trust Trading•Investment •Re-Insurance •MISR Banking •Fund •LITC under Management GIFT - Fund Programme Administrator •Labuan Limited •Mutual Funds Partnership & Limited - Private/Public Liability Partnership •Protected Cell Company •Foundations ……the above are offered in conventional and Islamic principles •Leasing 16
  17. 17. Labuan IBFC : Distinct Capabilities Advantages
  18. 18. The Outline of the changes on the Legal Framework1. Deletion of the word “offshore” to reflect the rebranding of Labuan IBFC.2. LOFSA renamed as Labuan Financial Services Authority (‘Labuan FSA’). • Labuan Financial Services Authority Act Four Acts has been • Labuan Companies Act retained with amendments • Labuan Trust Act • Labuan Business Activity Tax Act • Labuan Financial Services and Securities Act • Labuan Foundations Act Promulgate four new • Labuan Limited Partnerships & Limited Liability legislation Partnerships Act • Labuan Islamic Financial Services and Securities Act
  19. 19. Administer & Enforce LegislationThe scope and functions of the Labuan IBFC business are providedand administrated as follows ….. Acts of General Application in IBFC Regulatory Malaysia Labuan Financial Services Authority Authority Act 1996 i. Anti-Money Laundering and Anti Terrorism Financing Act 2001 ii. Mutual Assistance in Criminal Matters Act 2002 Labuan Financial Services Authority Inland Revenue Board i. Labuan Business Activity Tax Acti. Labuan Companies Act 1990 1990ii. Labuan Trusts Act 1996 ii. Exemption Order of Income Tax Act 1967iii. Labuan Financial Services and Securities Act 2010 iii. Exemption order of Stamp Act 1949iv. Labuan Foundation Act 2010v. Labuan Limited Partnerships & Limited Liability Partnership Act 2010vi. Labuan Islamic Financial Services and Securities Act 2010
  20. 20. Tax Framework• Taxation under the Labuan Business Activity Tax Act (LBATA) Labuan trading activities 3% on audited net profits, or flat rate of RM20,000 Labuan non-trading activities 0% tax• No stamp duties on:- • Instruments executed by a Labuan Company (LC) in connection with Labuan business activity • M & A of an LC • Instruments of transfer of shares between LCs
  21. 21. International Affiliation Name of Organisation ObjectivesGroup of International Finance Supervision of banking related in cross border activitiesCentre Supervisors (GIFCS)Offshore Group of Insurance Supervision of international insurance businessSupervisors (OGIS)International Organisation of Cooperative forum for securities regulatory agenciesSecurities Commissions (IOSCO)International Association of Forum of insurance regulators to promote financial stability andInsurance Supervisors (IAIS) international standard setting bodyAsia/Pacific Group on Money Collaborative platform for technical assistance and training toLaundering (APG) improve compliance with AML/CFT standardsIslamic Financial Standards Board Standard setting body to ensure sound and stable Islamic financial(IFSB) systemsInternational Islamic Financial Standard-setting body for establishment, development, selfMarket (IIFM) regulation and promotion of Islamic capital and money market
  22. 22. Labuan FSA : Client CharterOne of the key success factors of Labuan IBFC is effectiveness andefficiency of delivering its mandated functions.
  23. 23. Islamic FinanceThe wide range of Islamic financial products and servicesavailable in Labuan IBFC includes Islamic banking, Islamiccapital market, Islamic insurance (takaful), Islamicreinsurance (retakaful), Islamic funds, waqf and Islamictrusts administration. The products and services areoffered under various Shariah-compliant schemes byIslamic financial institutions in Labuan.The Labuan Islamic Financial Services and Securities Act2010 streamlines procedures and requirements for allShariah-related activities in Labuan IBFC with Labuan FSAas the licensing authority.
  24. 24. Annual FeesLabuan IBFC fees are amongst the most competitive Type of Company RM Type of Company RMLabuan Companies 1,500 Labuan Foundation 750Foreign Labuan Company (Branch Labuan Securities Licensee 5,000 5,300Operations) Protecting Cell Company (PCC) Licensee – 30,000Labuan Bank / Labuan Investment Bank PCC (Core) 80,000Licensee Protecting Cell Company (PCC) Licensee – 10,000Leasing 40,000 PCC (Each Cell)Labuan Insurance Companies Licensee: Labuan Limited Partnerships & Labuan 1,000 Limited Liability Partnerships• General/Life 30,000 Auditors 1,000• Captive / Insurance Manager, Underwriting Manager and 10,000 Liquidator 1,000 Insurance Broker Fund Manager (outside Labuan) 10,000• Master-Rent-A-Captive 13,000 Fund Manager (Inside Labuan) 5,000• Subsidiary-Rent-A-Captive 3,000 Fund Administrator (outside Labuan) 5,000Trust Company Licensee 8,000 Fund Administrator (inside Labuan) 2,000Private Trust Company 5,000 Public Fund 2,000
  25. 25. Operational requirements on Labuan banking
  26. 26. Labuan Banks Banking Licence Govern by Labuan Financial Services and Securities Act (LFSSA) effective 11 Feb 2010 Dealing in Non Ringgit Malaysia & Non-Malaysian Permitted Dealings with Malaysian Residents Full Banking License Investment Banking License  providing credit facilities;  Providing credit facilities  Labuan investment banking service;  Providing consultancy/advisory services  Islamic banking business; relating to corporate & investment  building credit business; matters or making investments on behalf  credit token business; of any person  development finance business;  Undertaking foreign exchange  leasing business or such other transactions, interest rate swaps, activities dealings in derivative instruments or  receiving deposits, derivative financial instruments or any  Other business approved by the other similar risk management activities Authority  Other business approved by the Authority  Not allowed to accept deposits.
  27. 27. Labuan Banks : Eligibility Eligibility Full Banking License Investment Banking License  An investment bank or group Must be a licensed bank or financial engaging in investment banking institution supervised by competent activities licensed by the regulatory authority authority in the country of origin Possess sound track record  A licensed bank or an established Accorded a good credit rating by financial institution or financial acceptable rating agencies service provider supervised by Supervised by a competent regulatory competent authority authority  Possess sound track record Conform to generally accepted  Any licensed institutions under standards of international banking approval of Bank Negara Malaysia practices or BIS, as the case may be.  Any person(s) with the necessary expertise and experience in investment banking industry.
  28. 28. Labuan Banks : Requirements/ApplicationsCapital RM10 mil – unimpaired by loss / RM10 mil – branch net working fundsAnnual FeesRM80,000 per annumPhysical PresenceSufficient staff maintained in LabuanDealings through Labuan officeMarketing offices in Kuala Lumpur or Johor Bharu (max 4 staff) allowedAllow co-location anywhere in MalaysiaBranches/full operational office allowed anywhere in Malaysia for Islamic banksApplicationundertaking letter – Head office/parent3 years business plan3 years audited annual accounts for the immediately preceding applicationletter of consent - home regulatory authority (where applicable)fit and proper persons:  controller or director or CEO ;  board of directors of a subsidiarysound track record, experience, expertise in similar undertaking. Note : For Islamic Banks – to appoint Shariah Supervisory Council / Advisor
  29. 29. Labuan Banks :International presence in Labuaninclude... Bank Country Barclays PLC UK Goldman Sachs USA UBS AG Switzerland BNP Paribas SA France The Royal Bank of Scotland Group plc UK Deutsche Bank AG Germany Bank of America NA USA Credit Suisse Group Switzerland JPMorgan Chase Bank National Association USA Kuwait Finance Kuwait
  30. 30. Global Incentive For Trading (GIFT)
  31. 31. Background of GIFT Programme Collaboration between Labuan FSA with Performance Management and Delivery Unit (PEMANDU) and Malaysia Petroleum Resources Corporation (MPRC). Facilitating the implementation of Oil & Gas Trading Incentive in Malaysia using a Labuan structure under NKEA-OGE Emulating Singapore’s Global Trading Programme 31
  32. 32. GIFT : Status Endorsed by the Authority on 6 Sept 2011 Endorsed by Bahagian Analisa Cukai, Kementerian Kewangan on 20 Sept 2011 Endorsed by NKEA Steering Committee on Oil, Gas and Energy, Chaired by YAB Prime Minister on 22 Sept 2011 Approved by YAB MOF on 26 Oct 2011 Launched on 31 Oct 2011 Five companies: Petronas, Dialog Group Bhd, YTL Power International Bhd , UK-based BB Energy and Rotterdam group, Vitol Trading, were awarded a trading license each. 32
  33. 33. Global Incentive for Trading (GIFT) A GIFT of incentives for traders, of specified commodities, to use Malaysia as their international trading base generating substantial tax revenues To enjoy GIFT, use Labuan IBFC structure to be known as Labuan International Commodity Trading Company (LITC) Why Labuan – ready incentive and tax framework, ease of establishment, financial infrastructure, and cost effectiveness 33
  34. 34. GIFT Structure  Specified as a Labuan financial business under Section 86 of the LFSSA Act 2010 (LFSSA)  Licensed by Labuan FSA under section 92 of the LFSSA and shall be referred to as Labuan International Commodity Trading Company (LITC)  The licence is valid for a period of five years from the date of approval and may be reviewed for renewal  Existing Labuan companies currently undertaking LITC business are required to be licensed as LITC by January 2013 (Thru Labuan FSA’s Directive under section 4B LFSA Act 1996) Activity  The LITC business is the trading, in any currency other than Ringgit, of:–  Petroleum and petroleum related products;  Minerals;  Carbon credits; and  Any other commodities as may be approved by Labuan FSA
  35. 35. GIFT Tax Incentives  Corporate tax rate of 3% of chargeable profits, or at the rate of 10% in the case where the LITC does not comply with qualifying criteria.  Other tax benefits e.g stamp duty, withholding taxes, personal taxes  50% exemption on gross employment income of Non-Malaysian professional, managerial staff including trader with the LITC who earn more than RM15,000 per month  The LITC shall be subject to the rate of 10% in the case where the LITC does not comply with the qualifying criteria. Qualifying Criteria  Minimum company revenue of USD 100 Million per year  Local expenses of at least RM 3 Million per year  No of start up staff: 3 professional traders Location Incentive  Registered office in Labuan, operational office anywhere in Malaysia
  36. 36. Performanceof Financial Industries
  37. 37. Performance of Labuan IBFC SECTOR 2009 2010 2011 ** GROWTH (%) Companies 7, 423 8,004 8,655 8.1 Banks • No of Banks 59 61 60 -1.6 • Loans (USD) 18.5b 19.8b 24.6b 24.2 • Deposits (USD) 10.2b 11.6B 9.5b -15.8 • PBT (USD) 249.7m 536.4m 404.9m -24.5 Insurance • No of Companies 149 169 181 7.1 • Premiums (USD) 1.1b 1.2b 1.6b 33.3 Leasing • No of Companies 136 176 227 29.0 • Assets Leased (USD) 21.9b 25.0b 27.6b 10.4 LFX • Market Cap (USD) 16.6b 17.1b 17.1b 0 Funds • Size (USD) 9.6b 9.6b 9.4b -2.1 Takaful / Retakaful • Gross Contributions (USD) 234.1m 296.7m 459.5m 54.9 Note : ** The numbers are subject to changes
  38. 38. Labuan IBFC : Social & Economic Contribution DIRECT INDIRECT• Complement domestic financial sector through its • Hotels offer of products and services • Restaurants• Regional integration through • Education trade and financing • Tourism and recreation• Critical mass of business • Residential properties stimulates economic activities • Transportation – Creation of Employment in • Services sector, eg Labuan – Direct and Legal, accounting and Indirect management services – Demand for household products and services – Catalyst for specialized industries which leverages on Labuan‘s natural advantages eg MISR. Oil and Gas 38
  39. 39. Q&AContact UsLabuan OfficeLabuan Financial Services Authority,Level 17, Main Office Tower,Financial Park Complex,Jalan Merdeka, Labuan IBFC Inc. Sdn. Bhd.87000 Labuan F.T., Malaysia. Suite 3A-2, Plaza Sentral,t. +6 087 591200 Jalan Stesen Sentral, KL Sentral 50470 Kuala Lumpur, Malaysiaf. +6087 428200 t. +603 2773 8977e. f. +603 2780 2077 e. info@LabuanIBFC.myKL Facilities Office • Hong Kong representative officeSuite 2A-06-01, Level 6 Block 2A, Suite 1102 11/FPlaza Sentral, KL Sentral, Malaysia Building50470 Kuala Lumpur F.T., Malaysia. No. 50 Gloucester Road Hong Kong, SARt. +6 03 2273 8200 t: +852 2527 2318f. +6 03 2274 8200 f: +852 2520 2938