LONDON, 25 April 2005 — The globalization of Islamic banking continues unabated with license applications for new banks in the process of being submitted to three regulatory authorities in the UK, Canada, and Kenya. The common factor is London, and all roads lead to the UK regulator, the Financial Services Authority (FSA), which seems to have set the global market alight following its authorization of the Islamic Bank of Britain in August 2004. The “UK model” of authorizing an Islamic bank has caught the imagination of banking regulators worldwide.
A delegation from the Central Bank of Kenya spent a week in the UK this month having meetings with the FSA, and with a number of local banks including Islamic Bank of Britain; HSBC Amanah; ABC International Bank and Lloyds TSB, which recently launched its two debut Islamic consumer finance products — a current account and an Islamic mortgage.
A group of investors from Canada is also in the process of finalizing a license application to the Canadian Central Bank for a stand-alone Islamic bank. They too had a number of meetings with the FSA and local banks earlier this year during a visit to London.
Both banks, according to reliable banking sources in these countries, should get the authorizations; and will eventually go to the market with a private placement to raise further equity funding. Canada especially should be a good investment prospect; given the soundness of the Canadian economy; and the presence of a largish above-average income professional Muslim immigrant minority community, characterized also by its diversity — Pakistanis; Croatians; Bosnians; South Africans; Egyptians; Palestinians; and others.
The third Islamic bank seeking authorization from the FSA is the European Islamic Investment Bank (EIIB), which confirms that it was incorporated in the UK on Jan.11, 2005, “with the objective of becoming the first independent Islamic investment bank in Europe”.
The word ‘independent’ is puzzling though in this context, given that EIIB is a privately-owned institution comprising founding shareholders largely similar to those of Islamic Bank of Britain (IBB). In fact, EIIB is the investment banking sister bank of IBB, and is being promoted by the Bahrain-based by Islamic Joint Venture Partnerships (IJVP) BSC.
IBB shareholders include the Emir of Qatar; Qatar International Islamic Bank; Dawnay Day Global Investments in the UK; and the London-based DCD London & Mutual PLC, a South African-owned financial investment group. The chairman of EIIB is Adnan Yousif, formerly chairman of ABC Islamic Bank and currently with the AlBaraka Banking Group in Bahrain. Yousif is also the brother of Abdul Rahman Abdulmalik, the current chairman of Islamic Bank of Britain.
EIIB says that it intends to submit an application for authorization to the FSA by the end of May. EIIB plans to offer Islamic treasury; capital markets; asset management; trade finance; correspondent banking and private banking products and services.
EIIB is capitalized at 110m UK pounds. Its recent private share offering to raise initially 50 million UK pounds closed in mid-April and was heavily oversubscribed. Subscriptions, according to IJVP, totaled in excess of 113 million pounds, compared to the initial target of only 50 million pounds.
“We decided to increase the initial capital we were seeking from founding shareholders from 50 million pounds to 100 million pounds before commencing the offering, due to indications of strong demand from potential shareholders. We are obviously delighted that even with this increase in the size of the offering, demand was very high, and the board of directors has decided to authorize the issue of additional shares to meet this high demand” stresses Yousif.
Subject to FSA authorization and consent, EIIB confirms that it plans to increase its capitalization from the current level of 110 million pounds to about 300 million pounds shortly after the bank commences operations, through a public offering in the UK and other permitted jurisdictions, and a parallel private placement in the Arab world and Asia.
