KUALA LUMPUR, 12 June 2014 - The Labuan Financial Services Authority (Labuan FSA) today releases its Annual Report for 2013 which highlights the achievements and developments of the Labuan International Business and Financial Centre (IBFC), strategies going forward as well as the financial performance of Labuan FSA.

For the year 2013, Labuan IBFC continued to sustain its growth momentum. The success was reinforced by the continuing efforts in enhancing the regulatory framework to maintain the effectiveness, stability and soundness of the financial institutions, intermediaries and overall financial system in Labuan. The improved regional economic growth prospects in Asia remain conducive for Labuan IBFC to continue building linkages for deepening and broadening of trade and investment activities in the region.

The number of companies incorporated in 2013 recorded a positive growth of 9.1% year-on-year, bringing the total Labuan companies to 10,352. The majority of these Labuan companies originated from the Asia-Pacific region, primarily engaging in financial services, trading activities as well as providing consultancy and advisory services.

The Labuan banking sector remained strong and stable. The 59 Labuan banks are sound and well capitalized with an industry average risk weighted capital ratio at 23.1% and core capital ratio at 23.0%. The Labuan banking sector has continued to grow in asset size and expand in loans and advances, with the majority of the loans provided to borrowers in the ASEAN countries. Islamic financing activities in Labuan have also registered a significant increase by 46.8% to USD775.6 million in 2013 compared to USD528.5 million in 2012. During the year, two new banking licences were granted, one to a Malaysian bank and the other to a foreign bank from Pakistan.

The Labuan insurance sector continued to attract new international institutions to establish operations in Labuan IBFC. During the year, 19 new licences were granted, comprising four reinsurers, three retakaful operators, three insurers, four captives and five brokers, bringing the total number of Labuan insurance and insurance-related companies to 213. It is noteworthy that the year also witnessed the entrance of a renowned Middle Eastern reinsurance company to establish its first overseas branch in Labuan to tap the regional business.

The total gross premiums for the Labuan general insurers and reinsurers continued to surpass the USD1 billion mark for six consecutive years. The Labuan captive insurance business also recorded a 33.8% increase in total gross premiums amounting to USD437.5 million, compared to USD327.1 million in 2012. Overall, the Labuan insurance sector has a strong margin of solvency of 5.2 times above the minimum regulatory requirement. The sector posted an improved industry profit before tax of USD263.3 million in 2013 compared to USD121.5 million in 2012.

For the reporting year, the Labuan leasing business has continued to be vibrant and a top performing sector with 72 new companies approved bringing the total leasing companies to 312. The positive trajectory in Labuan leasing business is complemented by the strong growth in the oil and gas industry. The accumulated assets leased rose to USD38.1 billion, of which 73.0% of the assets were derived from the oil and gas industry.

In the area of commodity trading business, more oil traders are taking advantage of the Global Incentive For Trading (GIFT) programme by establishing Labuan international trading companies in Malaysia. This is reflected in the increase in its number from nine to 23 companies in 2013. The extended incentive under the GIFT programme to include new commodities such as liquefied natural gas trading has increased the offerings by Labuan IBFC to provide diversified products and services to support the development of a downstream value chain of the oil and gas industry, and in complementing Malaysia’s efforts to becoming an oil storage and trading hub for the Asia Pacific region.

The increase in the population of high net worth individuals (HNWIs) in the Asia-Pacific has led to more diverse wealth management products offerings and has accelerated the growth of the wealth management industry in the region. The comprehensive range of wealth management solutions offered by Labuan IBFC would meet the unique preferences of the HNWIs in various markets, in particular in the Asia-Pacific. Also encouraging is the growth of the Labuan foundations to 93 in 2013 compared to 65 in the preceding year. The clarity provided by the Shariah Supervisory Council through the Shariah resolutions has also further facilitated the establishment of Islamic foundations and trusts in the Labuan IBFC.

Recognising that the development of the Labuan financial sector also depends on the existence of an efficient and robust regulatory framework, the Labuan FSA has continuously enhanced its prudential regulatory regime. New guidelines, which are in line with international standards, were issued to strengthen the position of the Labuan financial institutions in addition to addressing money laundering and terrorism financing to safeguard the integrity of the overall financial system. Similarly, guidelines for various business sectors were also reviewed and updated to be aligned with current operational requirements.

As the global economic and financial integration intensifies, the growing interdependence has increased the need for collaboration with other regulatory authorities to ensure enhanced supervisory cooperation. In 2013, Labuan FSA has expanded its regional and international networks for home-host cooperation through the signing of several Memorandum of Understanding (MoUs) with its counterparts to strengthen alliances in cross border supervision and to safeguard the stability of a regionally and internationally-connected financial sector. The Labuan FSA was selected as the representative for the Pacific Region in the Group of International Insurance Centre Supervisors. This representation will be an important platform for providing the region’s collective voice for the membership of the Pacific Region in the international financial affairs. Similarly, the Labuan FSA has also built domestic alliances with local authorities to strengthen the potential for further development in Labuan.

As the global growth prospects gradually improve, continued efforts to develop sound policies to navigate future challenges remain key. Moving forward, the efforts to sustain the growth momentum of Labuan IBFC will focus on three main areas. First, to further strengthen Labuan IBFC’s regulatory framework to safeguard financial stability. Second, to widen collaborative linkages with other supervisory authorities to promote a more robust framework and cooperation on supervisory enforcement. Third, to enhance the value propositions of Labuan IBFC through further developing the centre as a cost-effective regional hub for global corporations and investors to conduct regional businesses, as well as establishing strategic partnerships with domestic and international agencies in areas which will value-add to Labuan IBFC’s competitiveness.

For the financial year ending 31 December 2013, Labuan FSA recorded an increase in operating income to RM39.9 million compared to RM28.8 million in 2012, while its total reserves also increased to RM39.2 million.