Services: Labuan Banks

Labuan Banks

All Banking entities set up in Labuan IBFC are governed and regulated under the Labuan Financial Services and Securities Act 2010, Part VI, specifically provisions contained in Sections 87 to 100. All Labuan registered Banks, are deemed Labuan Trading Companies as defined in Section 2 of the Labuan Business Activity Tax Act 1990, and have a yearly election of either paying a flat tax rate of MYR20,000 per annum, or 3 percent of audited net profits. Labuan banks are in the business of providing credit facilities and receiving deposits, investment banking service, building credit business, credit token business, development finance business, leasing business or such other activities as approved by Labuan FSA. All Labuan Banks are not allowed to accept deposits or provide withdrawals in cash.

An applicant should meet the following minimum criteria:

  • Must be a bank or financial institution
  • Possess a sound track record
  • Accorded a good credit rating by acceptable rating agencies
  • Supervised by a competent regulatory authority
  • Conforms to generally accepted standards of international banking practices or BIS, as the case may be

An applicant is required to submit the prescribed Form L. The submission should include, but is not restricted to the following:

  • The nature of business of the applicant
  • The composition of its Board of Directors and senior management
  • Audited financial statements for the last two years
  • A three-year business plan, which should provide a detailed outline of its operations and strategies with regards to its Labuan entity
  • Any other information relevant to the application

The minimum requirements for the issuance of a licence are:

  • A letter of awareness from a competent regulatory authority that supervises the applicant
  • A letter of guarantee or undertaking or both from the parent company to be furnished to Labuan Financial Services Authority (Labuan FSA)
  • Payment of an annual licence fee of MYR100,000

Upon issuance of the licence, the Labuan bank is required to:

  • Comply with the statutory requirements under the Labuan Financial Services and Securities Act 2010
  • Maintain a physical presence in Labuan
  • Comply with the prudential and reporting requirements issued by Labuan FSA
  • Carry on business in any currency other than the Malaysian currency, except as permitted by the relevant authorities
  • Meet certain pre-determined criteria, should it prefer to co-locate
  • Conduct Islamic banking activities, which will allow it to open operational offices anywhere in Malaysia, and subject to the prior approval from Labuan FSA be exempt from maintaining an operational office in Labuan
  • Adhere to any other requirements issued by Labuan FSA from time to time.
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