DBS establishes first Islamic bank in Singapore

The Islamic Bank of Asia (IB Asia) is a joint venture between the majority stakeholder, DBS Bank, and 22 investors from prominent families and industrial groups in Gulf Co-operation Council (GCC) countries.

The bank will be incorporated with an initial paid-up capital of $418 million, with DBS contributing $250 million and holding an initial stake of 60%. IB Asia plans to attract capital from other GCC investors in the coming weeks to increase the bank’s capital to $500 million. With the proposed capital injection, DBS will continue to hold a majority stake, with no less than 50% plus one share.

Abdulla Hasan Saif, the adviser for economic affairs to the prime minister of Bahrain, was named chairman, and Jackson Tai, the vice-chairman and chief executive of DBS, as vice-chairman. The seven other board members include Khalid Abdulla Al-Bassam, chairman of Bahrain Islamic Bank, and Lee Hsien Yang, former chief executive of Singtel Group.

Vince Cook, the former general manager of Qatar National Bank in Doha, will be the bank’s new chief executive. The bank has also appointed four respected Islamic scholars to its shariah board: Nizam Mohammad Saleh Yaqouby, Mohamed Ali Elgari, Abdul Sattar Abdul Kareem Abu Ghuddah and Mohamed Daud Bakar.

Tai said IB Asia would originate and distribute innovative wealth management and capital market instruments for corporate and private banking clients in the Middle East and Asia. “Singapore is becoming a convenient stopover for GCC investors and capital flows bound for Asia,” Tai said.

Malaysia is far ahead of the curve in Islamic banking. The country’s first Islamic bank was set up in 1983, and there are 12 Islamic banks in the country. The Malaysian national bank, Bank Negara Malaysia, has set a target for Islamic banking to account for 20% of banking assets by 2010. As of March 2006, Islamic banking made up almost 12% of total assets. The central bank had RM117 billion ($34.2 billion) in Islamic banking assets as of June 2006.