Financial Services

World - Lack of Shariah compliant investments, talent in Takaful market

Source: Channel News Asia, 09 March 2010

The Islamic insurance or Takaful market is expected to see strong growth this year. Still, challenges remain including low market penetration and a lack of Shariah-compliant investment opportunities for takaful players. Industry executives said they want to see more Islamic bond, or sukuk, issuances in order to help them balance their portfolios away from equities and reduce risk.

The recent multi-billion dollar purchase of AIA was a massive vote of confidence in Asia's insurance sector. Industry executives said they were optimistic about growth prospects. Total Takaful contributions only account for just 1% of the global insurance market. But this is expected to increase significantly, thanks to growing interest among Muslims and non-Muslims alike in shariah-compliant investment and insurance products.

Japan - Regulations on brokers, insurers to toughen

Source: Kyodo News, 09 March 2010

The Japanese government submitted a bill to the Diet to toughen regulations on securities and insurance companies in Japan by requiring them to comply with capital regulations on a consolidated basis. With the proposed legal change, the government is aiming to strengthen regulations on the financial sector in concert with overseas regulators to prevent a recurrence of the global financial crisis.

It is hoping to get the bill passed before the adjournment of its current ordinary session in June so that the new requirement for securities companies can come into effect in 2011 and other changes can be gradually implemented by the end of 2012. The new requirement is aimed at allowing regulators to get a better grasp of financial institutions in their entirety.

China - Tightening the monitor on non-banking financing

Source: Xinhua's China Economic Information Service, 10 March 2010

The China Banking Regulatory Commission (CBRC) said that China would step up work to monitor non-banking financing. More focus would be put on businesses in connection with trust companies and the real estate sector to prevent banks from using non-banking financing to circumvent policies, said Liu Mingkang, chairman of the CBRC. The 2010 government loan target is RMB7.5 trillion (US$1.1 trillion).

However in January alone, banks extended RMB1.39 trillion (US$203.6 billion) in new loans -- 18.53% of the full-year target. CBRC opined that more work should be done to improve risk management capacity to achieve sustainable development of the non-banking financing sector. Non-banking financial institutions under the CBRC supervision include trust companies, finance companies, financial leasing companies, auto financing companies and money brokers.

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