Hong Kong possesses the required credentials to become an international center for Islamic finance, a development that has the full support of the government, said Hong Kong Financial Secretary John C. Tsang.
Speaking at a January 15 seminar co-organized by the Hong Kong Monetary Authority (HKMA) and the Islamic Financial Services Board (IFSB), Mr. Tsang said that Islamic finance has become part of the global financial system while Shariah-compliant products and services have grown rapidly in both use and popularity.
“To further consolidate Hong Kong’s position as an international financial center, we should actively leverage on this new trend by developing an Islamic finance platform, and focus on, among other things, developing a wholesale Islamic finance market,” said Mr. Tsang.
He said Hong Kong is an ideal location for developing Islamic financial services. “We already have a well developed financial services sector, which is underpinned by an open and transparent regulatory regime,” he said. “A significant number of leading international banks have devoted considerable resources to the creation and servicing of a variety of Islamic financial products.”
The Financial Secretary also highlighted the flexibility of Hong Kong’s legal system in supporting international transactions.
“It permits freedom of contract subject only to various public law restrictions, none of which should inhibit the growth of a market in these instruments for legitimate purposes,” he said.
Mr. Tsang noted that Hong Kong’s access to the markets of mainland China presents a unique advantage over other competitors.
“Hong Kong remains the only jurisdiction outside of the Mainland in which banks may transact business using the renminbi,” Mr. Tsang said, adding that this provides Hong Kong with an opportunity to develop wholesale markets in Shariah-compliant instruments for Mainland-based issuers.
Given the potential requirement for capital on the Mainland, Hong Kong could also play a significant role in structuring and financing Islamic investment products to meet the needs of Mainland borrowers, said the Financial Secretary.
The HKMA and the Treasury Market Association had a team study the possible challenges and implications of the growth of Islamic finance in Hong Kong.
“The team concluded that there are no major legal and regulatory obstacles to transactions involving wholesale Shariah-compliant financial instruments,” said Mr. Tsang.
To put in place a platform conducive to Islamic finance, the Financial Secretary said changes and clarifications might be needed in Hong Kong’s taxation structure to provide a level playing field for the issuance of Islamic bonds and other conventional bonds.
Mr. Tsang said that the first Islamic retail fund for sale to retail investors in Hong Kong was launched recently with the approval of the Securities and Futures Commission.
The fund, an index-tracking fund, attracted some US$45 million worth of orders by December last year, mainly from local investors.
Mr. Tsang added that the HKMA had decided recently to apply for Associate Membership of the IFSB, noting that a closer relationship with the board would help keep Hong Kong’s financial markets abreast of the latest developments in Islamic finance.
|
