KUALA LUMPUR, Sept 20 Malaysia's Islamic banks need to expand further into Southeast Asia to play a greater role in the management of international Islamic bonds, or sukuk, Malaysia's Central Bank Governor Zeti Akhtar Aziz said on Thursday.
"We encourage Islamic banks to venture out and participate, they need to enter into strategic partnerships with other (regional banks)," Zeti told a media roundtable at the Global Islamic Finance Forum (GIFF) in Kuala Lumpur.
"They need the distribution channel to investors in Asia, where the surplus funds (for sukuk) are."
Asian investors have historically taken up substantial portions of global issuances, but the task of managing these issuances is dominated by f oreign banks.
"International banks may have an advantage, they have a presence throughout the world," said Zeti.
Some 12 percent of Turkey's recent $1.5 billion sovereign sukuk was taken up by Asian investors. Asians comprised the second-largest group of investors for the sukuk, after the Middle East.
The sukuk was issued by the Turkish Treasury, with the help of Citigroup, HSBC and Kuwait Finance House. Zeti said that Malaysian banks could expand in the region through mergers and acquisitions.
"They can take up stakes in existing partnerships or alliances, and this is something they are encouraged to do if they have the capacity. They will need approval from us. This will further unlock Asia's potential," she said.
Malaysia's two biggest banks boast a strong regional presence, but their earnings remain anchored in their home market.
Maybank Islamic, the Islamic arm of Malayan Banking Bhd , is the largest Islamic bank in Asia with a presence in Malaysia, Singapore, Indonesia, Hong Kong and the Philippines. CIMB Islamic, the Islamic arm of CIMB, derives around 10 percent of its earnings from business in Indonesia, Singapore and Brunei. (Reporting By Al-Zaquan Amer Hamzah; editing by Stuart Grudgings)