KUALA LUMPUR, March 25 A provision under
Malaysia's Islamic Financial Services Act 2013 (IFSA) will
prompt Islamic banks to diversify the investment products which
they offer to customers, bank executives said.
Islamic banks will have until June next year to segregate
Islamic deposits from investment accounts and explain the
difference to customers. Deposits guarantee customers their
principal, while investment accounts do not.
"The differentiation will allow the institutions to develop
a wider range of products, for both classifications, to meet the
diverse needs," the Association of Islamic Banking Institutions
Malaysia (AIBIM) said in a statement on Tuesday.
Banks will incur some costs in educating staff and customers
on the distinction.
"Call centers and people on the front line must be ready to
answer queries," AIBIM president and Bank Muamalat Malaysia
chief executive Redza Shah Abdul Wahid told
reporters. AIBIM, which has 24 member banks, has been tasked
with overseeing the transition under IFSA.
"At the end of the day, it's a major exercise undertaken by
the industry to be able to transition efficiently," said AIBIM
council member and CIMB Islamic Bank chief executive
Badlisyah Abdul Ghani.
A clearer distinction between deposits and investment
accounts will allow banks to become more creative in designing
the accounts; for example, they may offer more products that use
liquid assets such as sukuk, equities and commodities as the
"We will sell this product only to sophisticated investors,
not just the man on the street," said Badlisyah.
IFSA, introduced by the central bank last year, aims to
increase protection for depositors by giving regulators more
oversight over the formation and promotion of financial
(Reporting By Al-Zaquan Amer Hamzah; Editing By Andrew Torchia)