KUALA LUMPUR, November 22, 2006: Bank Islam Malaysia Berhad (Bank Islam) and Bank Muamalat Malaysia Berhad (Bank Muamalat) broke new ground in Islamic finance with both banks agreeing to execute a derivative master agreement to document Islamic Derivative transactions.
The document is the first of such industry initiative in the world to standardize a document governing Islamic derivative transactions. In particular, this is part of the Malaysian Financial Market Association’s (Persatuan Kewangan Malaysia) initiative with participation from all Malaysian Banks.
Bank Islam’s Managing Director, Dato’ Zukri Samat, said that the objective of the agreement is to standardize the document which will lead to greater transparency in market dealings in derivative transactions.
As a result, he added, it will also create more liquidity with the participation of both Islamic and conventional banks, hence elevating Malaysia as a global Islamic hub.
“With this collaborations, we will be able to improve our risk management practice, balance sheet management, increase fund mobilization efficiency and enhance our investment banking capability, to name a few”, Dato’ Zukri said in a statement issued here today.
During the signing ceremony, Bank Islam was represented by its Managing Director, Dato’ Zukri Samat, while Bank Muamalat was represented by Dato’ Abdul Manap Abd. Wahab, its Chief Executive Officer.
At the same time, Dato’ Abdul Manap added, “the potential market for Shariah compliant derivatives is a new and exciting area for both banks. We look forward to addressing the unique set of challenges and opportunities in documenting these transactions and are delighted to be working closely with Bank Islam to this end.”
As the only two full-fledged domestic Islamic banks in the local industry, both Bank Islam and Bank Muamalat are fully committed towards helping Malaysia’s initiatives and vision to be an established International Islamic Financial Hub. The signing of the Master Agreement is a testimony to the commitment, he said.
Malaysia has the largest Islamic bond market in the world and according to credit-ratings agency Moody's Investors Service, about US$30 billion of the US$41 billion in Islamic bonds issued globally since 1996 have been arranged and issued in Malaysia.
Globally, there are about US$250 billion worth of assets in Islamic banks and the total is growing at 15 per cent a year. Moody’s estimates an additional US$300 billion will be in Islamic mutual funds.