Labuan Banks
As much as half of the world’s capital is estimated to flow through international business and financial centres, making banking an important activity in these centres. With the increasing cross-border trade volumes and more significantly, businesses are transacted instantaneously throughout the interconnected world. This presents enormous opportunities for Labuan bank serving as gateway for the capital and investment between Asia and the rest of the world. The seamless and round-the-clock banking services in Labuan IBFC has make the centre home to global banking institutions from Asia, Europe, America and Middle East.

Labuan IBFC is a global home for international banks and financial intermediaries looking to establish their operations and take advantage of the numerous associated opportunities globally. With a banking ecosystem of more than 50 banks and other financial intermediaries, Labuan IBFC provides a wide spectrum of businesses in both conventional as well as Islamic. The range of banking services offered are diverse and include commercial banking, investment banking, Islamic finance, project and infrastructure funding, structured finance, syndicated loans, trade and export financing as well as treasury services.

Our forward thinking approach and innovative financial services policies also cater for niche banking business in the digital space. Labuan FSA the granted the first digital bank approval in 2019, which is a milestone in Labuan IBFC’s banking liberalisation and innovation for digital business to flourish. There are two categories of Labuan banking licences, namely commercial banks and investment banks. The main difference between a Labuan commercial bank and a Labuan investment bank is that the latter is not allowed to conduct the business of receiving deposits. A Labuan bank can operate as a branch or subsidiary of a foreign bank or Malaysian bank. The centre offers qualified applicant for a Labuan banking licence with 100% foreign ownership enabling total control of its business. In addition, Labuan banks can establish office or offices in other part of Malaysia other than in Labuan to facilitate their business.

An applicant should meet minimum eligibility criteria to apply for a banking licence, which among others include it must be a bank or financial institution, supervised by a competent regulatory authority and to conform to international banking standards and practices. The setting up of an Islamic banking window by a Labuan bank does not require separate licence but submit application for approval by Labuan FSA.

To operationalise the bank, it must maintain a physical presence in Labuan and the director or principal officer must be a fit and proper person. The operating banks are required to comply with statutory laws governing the Labuan financial services as well as prudential and reporting requirements enforced by Labuan FSA.
Application for A Labuan Banking Licence
Applicant needs to fill in the LBB Form to apply for a licence to carry on Labuan banking business.  

Applicant needs to pay a processing fee to Labuan FSA in addition to the annual fee to be paid upon the grant of licence. The subsequent payment of annual fee is payable not later than 15 January of each year.

Client Charter
Where applications meet the necessary licensing requirements, Labuan FSA is committed to adhere to the approval delivery time.

Legislation and Guidelines
The Labuan banking activities conducted in, from or through Labuan are governed under the relevant laws, regulations and guidelines. Labuan banks must also at times ensure compliance to these laws and operational requirements as set up in the guidelines.

Supervision Approach
Labuan IBFC is bound by an effective regulatory and supervisory regime that subscribes to internationally-recognised standards and best practices in financial services and prudential regulation.

Labuan FSA adopts a risk-based approach to its supervision of the Labuan financial institutions. Under the risk-based framework, the supervisory activities require off-site surveillance and on-site examination. The supervisory activities conducted are governed by six steps supervisory process which are: Entity Analysis, Annual Planning, Monitoring and On-site Reviews, Risk Assessment, Reporting and Intervention, and Follow-up.

The supervisory approach in Labuan IBFC encompasses optimization of supervisory resource deployment through off-site monitoring, which focuses on collection of data from financial institutions and a robust off-site surveillance.

Greater emphasis is placed on early identification of emerging risk based on early warning system and vigilant monitoring on areas that pose significant risks to the safety and soundness of the financial institutions as well as stability of the centre. On-site examination will focus on high risk areas and industry-wide to enable the supervisors to form an objective view on the probability of failure and impact of failure based on the existing control framework of the financial institutions. The Labuan financial institutions are expected to have a good set of governance in place which should institute sound risk management practices and effective internal control to promote business transparency and integrity.

Each financial institution is subject to continuous monitoring by a relationship manager through effective off-site monitoring and on-site examination. The intensity of scrutiny and cycle of supervision depending on the risk profile of the institutions.
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