Deutsche launches sharia custody and fund services in Malaysia

Deutsche Bank has launched a sharia-compliant custody and fund service in Malaysia, which it says is the first product of its kind in the country.

Islamic Securities Services targets Malaysian and foreign Islamic fund providers and adds to an increasing number of such offerings from the German bank.

The firm says the growth of its sharia-compliant business is outpacing its conventional business. Islamic Securities Services follows the launch of an Islamic banking window in April last year and an international Islamic banking branch a month ago. In addition, Deutsche Trustees Malaysia added to its custody services with the launch in March of a registrar and transfer agency.

In addition to providing core custody and fund services, the new offering will help Islamic fund clients manage sharia tagging, income cleansing and financial statement preparation.

When asked if there was a real need for Islamic-specific products, Ridzal Sheriff, head of global transaction banking at Deutsche Bank in Kuala Lumpur, says: "Yes. As the Islamic funds' segment grows in size and complexity, tracking for sharia compliance becomes critical."

It is a requirement from a regulatory, sharia council and investors' perspective, he adds. Deviations from these standards would result in loss of confidence and negatively affect a fund's branding.

As of December 31, capitalisation of sharia-compliant stocks on Bursa Malaysia was RM638 billion ($198.6 billion), or 63.8% of the market, while there are 150 sharia funds, with RM22 billion in assets under management, representing 11.5% of the market.

In Malaysia, a bank must be a licensed Islamic banking entity before it can offer sharia products, says Sheriff, who took up his current role last year. Next, the banking products need approval from a bank's internal sharia council and, finally, they have to be in line with Islamic regulations determined by the central bank, Bank Negara.