First Islamic Banking Window in Hong Kong Launched

With Hong Kong as a key international financial center and Malaysia firmly establishing itself as a center for Islamic Banking, it is only a matter oftime when both would come together on the shared objective of promoting Islamic financial services in Asia to the world.

Hong Kong is in an enviable position where the market sees it as a link between the Far East and the Middle East. With colossal projects in China likepower plants, transmission grids, refineries, pipelines, utilities, ports and LNG facilities in the offing, Hong Kong is the logical center for Shariahcompliant financing structures. Hong Kong today has opened its doors to Islamic banking and finance to position itself as an active player in the rapidlygrowing field of Islamic finance. With the launch of Hong Kong's first Islamic Banking Window, the Hong Kong government has manifested its willingness tobuild its human capital and its overall Islamic finance capability.

Malaysia, for its part, has set its sights on establishing itself as an international center for Islamic Finance. The Central Bank of Malaysia (Bank NegaraMalaysia or BNM) has the depth and the experience to be the ideal partner and the international link in the growth of Islamic finance in Hong Kong bysharing its expertise in this field.

Hong Leong Bank (HLB) has an Islamic Bank in Malaysia, Hong Leong Islamic Bank (HLISB), and is a major player in the Islamic Banking industry. Hong LeongBank with its branch in Hong Kong will facilitate the introduction of Islamic Wholesale and Investment Banking Financial Services in this market. The HongLeong Bank HK Branch Islamic Banking Window (IBW) will enable the Bank to tap the West and North Asia regions and Mainland China markets. It will be theplatform from which HLB will expand its international Islamic financial business. Through its IBW, the Bank will be able to facilitate cross-border Islamictransactions, hence, actively contributing to the promotion of a vibrant Islamic financial market in Hong Kong and the region.

The Bank's IBW in Hong Kong will offer innovative Shariah-compliant wholesale and investment banking solutions. HLB, with its culture that encouragesinnovation and creativity, has proven that it has the agility and flexibility to customize Islamic financial solutions according to clients' needs. Withproven and established operations in Malaysia, HLB HK will leverage on the expertise that is readily available out of its headquarters in Malaysia.

Hong Leong Bank has the capability to customize Islamic financial solutions that are designed to help maximize investors' returns within Shariah-acceptedtenets. The Bank has a wholesome Shariah support structure – from conceptualization to product origination then Shariah certification and implementationuntil financial reporting. These all adhere to the Central Bank of Malaysia's Shariah standards, the Islamic Financial Services Board's standards as wellas all other globally accepted Shariah standards and Shariah best practices thus making HLB fully capable of handling and structuring cross border Islamicfinancing structures. The Bank's first product offering, the Commodity Murabahah programs plus its innovative Sukuk structures and its Shariah AdvisoryCommittee, composed of local and international Shariah based scholars, are testament to the Bank's commitment to Shariah product excellence. Its CommodityMurabahah programs plus the Sukuk or Capital Market Instruments will help investors raise funds to finance corporate activities and corporate growth.Globally accepted Shariah structures such as Ijarah (leasing), Mudharabah (profit sharing) or Musyarakah (partnership) will be adopted in the structuringof Sukuks.

While the Bank has plans of establishing completely separate operations for conventional and Islamic banking, initial operations will be conducted on ashared basis. However, as per international Shariah requirements, there will be a clear segregation of capital, profits and expenses between Islamic andconventional and a separate treasury book for Islamic accounts and fund management will also be kept to prevent co-mingling.

Our Shariah Advisory Committee of Malaysian and international scholars with a strong Shariah and contemporary legal, economic and finance background, willreview and comment on the principles, contracts and transactions relating to all proposals, applications and issues submitted by the Bank. They willprovide the Bank with proper advice, comments or approvals to ensure that products, contracts, transactions and dealings as well as main sources of fundsand areas of investments are in accordance with globally accepted Shariah precepts.

With Central Bank of Malaysia's first ever approval for a Malaysian bank to set up an Islamic Banking platform overseas and the Hong Kong MonetaryAuthority's first ever permission for the same in the territory, HLB is able today to launch its Islamic Banking Window to operate within its Hong Kongbranch.

HLB, as an initial salvo, will be offering the Commodity Murabahah program, a trade-related transaction with mark-up price element that serves as liquiditymanagement instruments thus paving the way for Islamic Money Market transactions in Hong Kong.

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Press Release - 15/08/2008