'ASEAN fund passport key to Brunei becoming regional financial centre'
BANDAR SERI BEGAWAN
THE realisation of a regional fund passport would provide a way for Brunei to become a regional financial centre, a top banking official said.
In an interview published in the Oxford Business Group's (OBG) 2013 country report for Brunei, the managing director of Bank Islam Brunei Darussalam, Javed Ahmad, said that Brunei has a deep domestic financial market.
He explained that Brunei's key advantages that would allow it to become an important Islamic financial centre in the Association of Southeast Asian Nations (ASEAN) region lie in its geographic position and a strong regulatory environment as well as sound Islamic financial insitutions.
"We need to market more aggresively and offer financial insititutions solid reasons for an offshore presence here," said Javed.
"Regarding specific areas, I am a strong proponent of positioning the country as a wealth management centre."
He said this is an area in Brunei for which investment products are needed and can be opened up to international investors, thus enlarging financial institutions' customer base.
"In terms of policy, there has been quite a bit of discussion at the regional level. For example, some have brought up the idea of a fund passport whereby a fund approved in one particular country can be distributed without the need for further approval in other countries," explained Javed.
He said the idea might not happen in the short run, but it is certainly a possibility as it had happened within the European Union (EU).
"I think that if this type of environment can become a reality, it would represent a tremendous opportunity for a country like Brunei and would provide a way for it to become a regional financial centre."
When asked to comment on what regulations need to be put in place to further Islamic financial services locally, Javed said that one of the key requirements was consumer protection.
"The personal finacing directive came about six or seven years ago, and we had a credit card directive about two years ago."
" I think it is important that we have strong consumer protection legislation, particularly, for financial services, and this is something I foresee coming out in the next few years," the BIBD managing director said.
"Another trend is legislation regulating the securities industry, which has several areas that require updating. These will be important for enhancing Islamic financial services."
Previously, The Financial Times quoted a report by PricewaterhouseCoopers commissioned by Australia's Financial Services Council, which said that Asia's fund managers were convinced that the establishment of an Asia fund passport is critical for the industry's growth.
"It would give them access to larger savings pools, economies of scale and a wider range of investment opportunities," the report said.
For Australia, the absence of a cross-border fund vehicle in Asia is a major issue as it can only access the New Zealand and Hong Kong markets under regulatory mutual recognition agreements.
Currently, if Australian investment managers want to launch their products into the fast-growing Asian markets they have to set up an office in Europe and export the Undertakings for Collective Investment in Transferable Securities (UCITS) from there back to Asia, the report added.
It added that in contrast, European-based fund managers are able to offer their investment products to a large number of countries in Asia and because of its well-established system of regulatory recognition, 90 per cent of the offshore investment products offered in Asia come from Europe.
The UCITS are a set of EU Directives that aim to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state.
The Brunei Times