Career Day 2018

Labuan Investment Bank Group

And

Career Opportunities in Investment

Banking

8 December 2018

© Howard Choo V2.0

Presented by

Dato’ Howard Choo, MD & CEO

IBH Investment Bank Limited

Organised by

Labuan IBFC and UMSKAL

Section I

LABUAN INVESTMENT BANK GROUP (LIBG)

INTRODUCTION TO LABUAN INVESTMENT BANK GROUP (LIBG)

Initiated on 8 July 2010 by Labuan FSA approving a Protem Committee comprising:

Chairman : Dato’ Howard Choo (IBH Investment Bank Limited)

Vice Chairman : Mr. Mohsen Hosseini Hossein Pour (Middle East Investment Bank Limited)

Secretary : Puan Zanariah Ja’afar (Amanah Raya Investment Bank Limited)

a) To promote the Federal Territory of Labuan as an International Business Centre.

b) To deal with common issues of concern.

c) To disseminate information of common interest.

d) To communicate and/or liaise with relevant authorities and bodies on all matters affecting the interest of members.

e) Generally to promote and protect the mutual interest of members and to do all such other lawful acts as are incidental

and conducive to the attainment of the above objectives or any of them.

Purpose: To establish a self-regulating body for Labuan Investment Banks.

Objectives

Scope

Membership • All operating Labuan Investment Banks holding a current banking license issued by Labuan FSA.

• Membership is compulsory.

Committee: 3 members from Labuan Investment Banks

Frequency of Meetings a. Committee

At least four (4) times in a year.

b. Labuan FSA

At least twice a year.

a) To receive proposals affecting industry wide practices.

b) To prepare the Committee’s view on such proposals for the attention of the authorities.

c) To administrate industry wide conduct.

d) To undertake any other activities that might promote Labuan FSA or be beneficial to the members.

1-3 © Howard Choo

MEMBERS OF LIBG

0

20

40

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

48 44 44 42 41 42 42 43 43 43 41 40 42

8 9 9 9 13 14 15 16 15 14 13 11 12

No.

of B

anks

YearLabuan Banks Labuan Investment Banks

Number of Banks in Operations

No. Bank Incorporation

1 Al-Hidayah Investment Bank 2002

2 City Credit Investment Bank 2002

3 RUSD Investment Bank 2002

4 AmanahRaya Investment Bank 2006

5 Asia Pacific Investment Bank (f.k.a Asia Pacific Development & Investment Ltd) 2008

6 European Credit Investment Bank 2008

7 Middle East Investment Bank 2008

8 Asian Trade Investment Bank 2009

9 IBH Investment Bank 2009

10 PG Asia Investment Bank 2012

11 ACE Investment Bank 2016

12 Blue Investment Bank Inc 2016

13 Baxian Private & Investment Bank 2018

14 Faisal Investment Bank 2018

15 Capital Investment Bank N/A

16 Goldman Sachs Investment Bank N/A

Source: Labuan FSA Annual Report 2017

1-4 © Howard Choo

Typical Investment Bank Business Framework

People

Investment Banking Global Financial Markets

Islamic Banking Financial Services

Equipment Finance

Real Estate Finance

Project Finance

Indo-China & Regional

West Asia

Greater China

Structured Finance

Private Equity

Venture Capital

Fund Management

Mezzanine Financing

Factoring

Capital Markets Corporate Advisory

Derivatives & Futures Trading Commodities Exchanges

Mergers & Acquisition

Regional Specialised Services

1-5 © Howard Choo

Regulatory Framework of Labuan Investment Banks

Labuan Companies Act

1990

Labuan Financial Services

Authority Act 1996

Labuan Financial Services and Securities Act

2010

Labuan Business Activity Tax Act

1990

Anti-Money Laundering and Anti-Terrorism Financing Act

2001

Any other laws relating to

business and financial services

in Labuan

1-6 © Howard Choo

Regulatory Requirements (Non Exhaustive)

Compliance with minimum audit standards.

Maintaining a minimum working fund of MYR 10.0 million or its foreign

currency equivalent.

Compliance with Fit & Proper Person requirement guidelines.

Compliance with Labuan FSA Prudential Guidelines on Banking Business.

Compliance with capital adequacy requirements.

Compliance with timely submission of statistical returns to Labuan FSA.

Compliance with sanctions imposed by UNSC, USA, FATF and other authorities.

Compliance with AML/CFT guidelines.

Compliance with Financial Reporting Standards.

1-7 © Howard Choo

Section II

CAREER OPPORTUNITIES IN BANKING

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…..defined as providing financial products and

services to the general public, to domestic

businesses-big and small, to government agencies,

to international businesses, and to other financial

organisations.

…..also includes the activities of accepting and

safeguarding money from the public.

What is Banking?

© Howard Choo

(Source: AllBankingSolutions.com)

1-10

“banking is a knowledge-intensive, skills

based and relationship-rich industry”…

Quote from a past BNM Governor

“Competence and skills development have

always been an area of focus..”

“..more competitive and more complex…”

What is Banking?

© Howard Choo

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Banking Categories

© Howard Choo

Conventional Banking/Islamic Banking Commercial Banks

Merchant Banks now known as Investment

Banks

Finance Companies now defunct in Malaysia

Offshore Banks Offshore Investment

Banks

Local Banks/Foreign Banks/Regional

Banks/Global Banks

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Commercial Banks = 26*

Finance Companies = 0

Merchant Banks** = 11

Islamic Banks = 16

* Domestic Anchor Banks = 8

Affin Bank/Alliance Bank/AmBank/CIMB/HLBB/Maybank/Public Bank/RHB Bank

** trading as Investment Banks

Malaysian Financial System - Overview

© Howard Choo

(Source: BNM Report 2017)

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Examples

© Howard Choo

CIMB Bank Berhad

Hong Leong Bank Berhad

Citibank Berhad

Standard Chartered Bank Malaysia Berhad

United Overseas Bank (Malaysia) Bhd.

Commercial Banks

Bank Islam Malaysia Berhad

Bank Muamalat Malaysia Berhad

Al Rajhi Banking & Investment Corporation (Malaysia)

Berhad

Kuwait Finance House (Malaysia) Berhad

Hong Leong Islamic Bank Berhad

Islamic Banks

Affin Hwang Investment Bank Berhad

KAF Investment Bank Berhad

Kenanga Investment Bank Berhad

Maybank Investment Bank Berhad

RHB Investment Bank Berhad

Investment Banks

Bank Pembangunan

Bank Rakyat

Bank Simpanan Nasional

EXIM Bank

MIDF

Sabah Development Bank

Bank Pertanian

SME Bank

DFIs – Development Financial Institutions

CIMB Bank (L) Limited

Citibank Malaysia (L) Limited

DBS Ltd., Labuan Branch

Deutsche Bank AG, Labuan Branch

Maybank International (L) Ltd

Offshore Banks

IBH Investment Bank Limited

Al-Hidayah Investment Bank (Labuan) Ltd

City Credit Investment Bank Limited

RUSD Investment Bank Inc.

Asian Trade Investment Bank Ltd.

Offshore Investment Banks

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Financial Master Plan

© Howard Choo

The Financial Sector Masterplan, a

document launched on 1 March 2001, to

chart the future direction for the financial

system over the next 10 years.

Outlines the strategies to achieve a

diversified, effective, efficient and

resilient financial system.

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A Comparison - Labuan & Onshore Investment Bank

© Howard Choo

Criteria Labuan Investment Bank Onshore Investment Bank

1 Scope of Market • International including Malaysia • Only in Malaysia

2 Licence • Comprehensive including Islamic Banking, Fund Management, Capital Markets, lending activities, derivatives market, foreign exchange operations

• Principally in stock broking, domestic debt and capital markets • Require Securities Commission approval for fund management • Restrictions by Bank Negara Malaysia on lending activities

3 Revenue • All activities under Fund Management, Corporate Advisory, lending activities

• Primarily from stock broking

4 Regulator • Labuan Financial Services Authority (Labuan FSA) • Guided by Labuan Financial Services And Securities Act 2010

• Bank Negara Malaysia • Securities Commission • Bursa Malaysia

5 Currency • Can lend in any major currencies except Ringgit • Alternative Ringgit lending is through SBLC (product substitute) giving same effect

• Limited to Ringgit loans only

6 Tax Rate • Pays only 3% profit tax or MYR20,000 as elected annually • Pays Malaysian corporate tax at 25%

7 Customer • Any customer, domestic and foreign, onshore and Labuan • No consumer loans

• Only Malaysian corporates • No consumer loans

8 Ownership • must be FI owned

• All Bank or Institution owned • Merger of stockbrokers and merchant banks • No new licences (Affin, Alliance, AmInvestment, CIMB, ECM Libra, Hong Leong, Hwang- DBS, KAF, Kenanga, Maybank, MIDF Amanah, MIMB, OSK, Public Investment, RHB)

9 Operations • Labuan and KL • JB, if applied for • Any other parts of the world

• Malaysia only • Branches of stock broking firms allowed as branches of the Investment Bank

10 Capital • Minimum MYR10.0 million • IBH Bank’s target is USD100.0 million at holding company level

• Minimum MYR500.0 million

11 Controlling Interests

• No restrictions • changes exceeding 15% notification to LFSA

• Restricted to maximum 20% per shareholder

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A Comparison – Labuan Investment Bank & Malaysian Commercial Bank

© Howard Choo

Criteria Labuan Investment Bank Domestic Commercial Bank

1 Business Focus • Fee income from Advisory, Interest Income from loans, Fund Management Income

• Largely interest income from loans • Money market and treasury products • Trade Finance

2 Market Scope • Global including Malaysia • Domestic market

3 Capital Need • One-off at level predetermined in Business Plan • Continuous need to support Balance Sheet • Basel II capital demand to support risks

4 Capital Utilisation • Efficient as no demand for liquidity and statutory reserves by Central Bank

• Not fully efficient • Unused capital support required for maintaining statutory reserves by Bank Negara Malaysia • Risk-adjusted capital demand

5 Ownership • No restriction • Opportunity in IBH Investment Bank • Offers active participation and management

• Controlled by Bank Negara Malaysia • If purchased in open market, average PE > 20 times which is costly • No controlling interests allowed • Passive investment

6 ROE • Offers higher return on investment due to cost structure • Pure investment banks ROE above 25%

• Market average ROE 16-18% for Malaysian Banks

7 Products • M & A • Corporate loans • SME loans • Foreign Exchange • Fund Management • Derivatives • IPO

• Consumer • Retail and SME • Corporate • Trade • Foreign Exchange and Money Market

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H ead O f f i ce or Branches?

Banking Departments

© Howard Choo

Marketing/ Credit/ Loan

Administration

Risk Management/

Treasury & Markets /

Accounts & Finance

Corporate Communications

/Audit/ Loans Recovery

Consumer Banking/ Corporate Banking/

Enterprise Banking

Private Banking/ HR-

Compensation, Performance,

Training

IT Dept

Legal & Secretarial/ Operations/ Property & Gen Admin

Compliance Dept (AML/CFT

functions)

where would you like?

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the Positives & the Negatives

© Howard Choo

• A life long career – depends on you

• Challenging work environment

• Financial rewards

• Perks and benefits

• Opportunities to understand how businesses operate

• Networking

• Continuous learning experience

• Develop specialised skills

• Exposure to technology

• A chance to travel

What Banking Can Offer?

• Long hours is the trend today

• Need to remain focused all the time

• Demanding customers

• Continuous Professional Development (CPD) required

• High performance culture

• Burn out syndrome

• Minimal error tolerance

• Family life

• Too profit driven

• Maintain high Ethical Standards

Positives

Negatives

Demand

Attributes and Qualities

© Howard Choo

Able to sustain long hours of

work

Honesty and integrity

Reasonable communication

skills

Soft skills and hard skills

Willing to learn and willing to ask

questions

Modest, self motivated and

teamwork

Focused and accurate

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Code of Conduct - A Snapshot

© Howard Choo

• To be honest and righteous and to exercise the highest integrity at all times;

• To be professional in all dealings with staff, clients and other business associates;

• To devote full time to the Bank's work and to promote the Bank's interest at all times;

• To uphold the Bank's name and reputation at all times;

• To excel in work;

• To deliver the highest standard of service;

• To respect the dignity of all jobs;

• To maintain in strictest confidentiality both while they are in the service of the Bank and after leaving the employment of the Bank, all information acquired directly and indirectly in the course of work or by virtue of their position in the Bank. Information should not be disclosed without proper authorisation;

• To avoid, at all times, any conflict of conduct in all undertaking (eg: Approvals required for directorships, related party lending, gifts)

• To abide by all policies, rules and regulations, and other practices laid down from time to time.

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THANK YOU