IB : Japan Is a country which widely adopts conventional banking and finance practices. As a foreign bank, what are the main factors that attracted BTMU to tap the Islamic finance market?
NN: It is always perceived that Islamic bag and finance is related to the GCC and Saudi Arabia. In reality there are 1.6 billion Muslim worldwide and according to statistics two-thirds of them are found in Asia. Islamic Finance become a significant financial intermediation now days . Many cross border and project financing deals that are Sharia- compliant deal are happening globally. This gave us a good reason as to why Islamic Finance and overseas market is an attractive market to penetrate . We consider Asia as a potential market, because of the strong connection we feel towards Asia and in term the of Islamic banking and finance, it is as a good way to expand our presence and diversify product offerings.
IB : And why did you choose Malaysia to be the centre of your operation?
NN: We have been here in Malaysia for the past 57 years. Malaysia has moved forward in the area of Islamic finance given the advantage of its positive legal and tax infrastructure. The Malaysian Government and the central bank, Bank Negara Malaysia are very supportive towards the Islamic banking and finance initiative, with a comprehensive Shari’a compliant regulations and framework, excellent taxation structure – the 0% tax holiday provided for Islamic finance in foreign currencies is one of the positive developments that enabled our initial establishment Malaysia. Apart from these, world-class education for banker in the Islamic Banking and finance and the availability of skilled professionals and human capital in the field in Malaysia contributed to BTMU Malaysia’s ability to grow its global Islamic banking business out of Malaysia. The positive environment enables BTMU Malaysia as a new entrant into Islamic banking and to develop its capabilities leveraging on Malaysia’s positive legal and tax framework for Islamic finance. Japanese investors find Malaysia as a stable country in terms of its currency, economy, infrastructure and politics compared to neighboring countries. Due to the decreasing trend of the domestic market in Japan, we believe that there is high potential and many opportunities for Japanese investors to invest in Malaysia, and at the same time tapping into Islamic finance industry. The strong economic ties between Malaysia and Japan over the past years have opened up many doors for Japanese investors, with great success stories to be shared and giving the trust to other potential investors to follow the footsteps. And with recent initiatives in bilateral financial co-operation between the two countries the ties have further strengthened. Islamic finance is one of the keys area of focus under the corporation that BTMU Malaysia is keen to contribute to more significantly.
IB : What about the support from the Japanese Government and the community towards Islamic Banking and finance in Japan?
NN: Well. I would say that the marker is not there yet. Islamic Finance is not the first things that will come up in their minds when they think about banking . Having said that , Japaneses companies are ” national brands ” they are encouraged to expand potential investment into other companies in enhancing their brand presence. We do hope that through the initiative such as the issuance of Yen Sukuk , it will attract more potential investors to venture into the are of Sharia – compliant investment.
IB : When we talked about community perception on Islamic banking , how difficult it is to change the perceptive of people that Islamic banking and finance is not solely about religion?
NN : People do question, but sometimes they do know the exactly what they questioned . Islamic Banking and finance is similar to conventional banking but more to conservative in a way where it prohibits activities related to speculations and financial gambling or impermissible activities according to the Islamic law. We see it a concept to expand business , in assisting the development of the community and the environment.
IB : What are your thought about the current Islamic Banking and finance development in Malaysia and in Japan? What are the differences between the two countries in regards to the Islamic financial model used?
NN : As mentioned earlier in Japan the requirement are not yet as Japanese borrowers or companies do not currently require financing in an Islamic manner. Potentially companies with may require or deal with Islamic financial might be those that are making investment outside of Japan. As there is a minimal requirement for Sharia – compliant financing in Japan, no Japanese Bank is currently able to or allowed to offer Islamic finance product in Japan. This is not just a due minimal requirement , but Japanese bank regulator does not allow Japanese bank headquarters or branches to conduct Islamic financing activities. Currently only Japanese bank subsidiaries are allowed to provide Islamic banking and finance services. And BTMU Malaysia is the only subsidiary representation the BTMU group that provides Islamic banking services , also the customers of Islamic are mainly non Japanese . Having said that positive movement is noted in Islamic financing activities in Japan, Back in 2012 Japanese PSA introduced a new tax framework for J-Sukuk to promote Sukuk issuance in the Japanese capital market . And adding to that there is a possibility that Japanese banking regulator allows overseas branches of Japanese bank to provide Islamic banking services in the near future. Although I would say that the impact is still limited , gradual development of Islamic Banking and finance activities is observed in japan . It is in the pipeline .
IB : By implementing and practicing Sharia compliance under BTMU Malaysia has this initiative attract more potential investors and customer towards your product offerings and services ?
NN : When we talked about Sharia compliant product and services , the line is quite similar. Since we don’t do retail banking in Malaysia , we offer corporate products designed to serve the variety of customers need and requirement. Our Islamic banking products and services are being developed and positioned at par with quality of our existing conventional products that are well established and globally accepted . Like other foreign bank which offer Sharia compliant products and services , we have dedicated in-house Sharia Committee , that ensures our products comply with local requirement in various jurisdiction. Through constant review and concussion , these have enabled us to provide solutions to our customers and meet global standards and acceptance . As a result , we have expanded our Islamic banking services not only to clients in South East Asian countries such as Singapore , Brunei and Indonesia and most recently in September this years , we have successfully provided our first financial services in the Middle East . Based on our existing Sharia-compliant offerings , we are positive that we would be able to grown our Islamic banking services to the wider global markets .
IB: In meeting customer requirements in various jurisdictions , in your view , is dis-harmonization of Sharia standard impede the growth of Islamic banking industry?
NN: Definitely , these will be differences in dealing with customers from different countries with different views and jurisdictions. However , I believe that there are no issues that cannot be resolved . At some point , dis-harmonization of standard could pose an impediment to the development of the industry , but it also provides room to growth . So far , we haven’t experienced any difficult in dealing with customer with different jurisdiction. We always find ways to develop and enhance our products to meet the requirement in others countries . In other words , we always find ways to understand any arising issues to find mutual understanding.
IB : How do you define the unique attributes between conventional banking and Islamic banking services?
NN : Conventional banking has been the mainstream and the market”s familiarity to the conventional banking system in deep-rooted . Nowadays , customers’s needs are changing and Islamic banking services are seen in the market today as the alternatives to the existing system that has the ability to meet greater sophistication and acts as the medium that will contribute to financial stability . During the financial crisis, we have seen that Islamic finance was able to preserve factors that mainly contributed by features of offerings that preclude excessive speculation. This is an important point that Islamic finance could showcase as one of the viable alternative to the mainstream or conventional finance.
IB : what are the main challenges faced by BTMU Malaysia for the past five years in Sharia compliance and Islamic financial services ?
NN : BTMU , Malaysia as one of the first movers in Islamic finance from Japanese banking institution , the main challenge that we had to face was that we needed to develop the business from ground-zero. However with the support of the government of Malaysia and Bank Negara , our decision to base the Islamic finance operation in Malaysia , has provided us with many advantages to move on swiftly due to the conducive infrastructure and the availability of highly skilled human capital in the country . Leveraging on the extensive customer network of BTMU Malaysia and also BTMU group , we have been able to build our solid customer base for Islamic banking business despite the competitive environment.
IB : We have heard many discussion and debates on Social responsibility of the ethical banking environment , what are the contribution made by BTMU Malaysia towards the Islamic banking industry and society in particular ?
NN : As a responsible corporate citizen , BTMU Malaysia is always committed t developing and nurturing society’s next generation , promoting environment sustainability ad in ensuring the well being of our employees and the communities in which we operate. Globally , we strive to meet the current needs of our stakeholders by maximizing our environmental . societal , and economic performance while minimizing any potential negative impact on their future needs. We have been continuously enhancing our offerings and solution to meet various customers need in the industry segment . In the year 2013, we have enhanced our basic Islamic finance offerings by providing few more products ( Ijarah Financing -i’ Istisna Financing-i, Bank Guarantee-i , Standby Letter of Credit -i , Standby Letter of Credit-i) to meet customer’s need . As we grow in product sophistication and capabilities , we intend to contribute more effectively to others areas including SRI as to part of our continuous contribution to sector.
IB : BTMU Malaysia had achieved various recognition in the past two years . Can you share with us , the list of awards or achievemenet s gained by BTMU Malaysia and what actually inspired you to issue the world’s first yen-denominated ” Emas ” Sukuk?
NN : Yes in the last couple of years BTMU Malasysia has won several awards including Wakalah Deal of the Year( 2013). The Best Japenese bank offering Islamic Services ( 2013), Structured Finance Deal of the Year (2012) and Best Fund Distributor (2012) . Achievements are that we have expanded our Islamic banking business to dients not only in Malaysia but also in countries in South East Asia and the Middle East. The issuance of Sukuk was placed as an objective to secure alternative funding sources for BTMU Malaysia in managing the liquidity to match the increasing and growing exposures to the global Islamic banking business. The reason why we issued our first Sukuk in USD and JPY was to diversify our sources of fimding by attracting different investors across currencies. For JPY, we want to create more awareness and educate both Japanese issuers and investors to consider Sukuk as an alternative to their current financing and investment instruments. So, hopefully, our entry into the market could trigger more issuance of Sukuk by Japanese companies and promote Japanese investors to look at investing in Sukuk. Last but not the least, it is also a part of BTMU Malaysia’s effort to support the bilateral financial cooperation between Japan and Malaysia.
IB: What do you foresee will be challenges for BTMU Malaysia in terms of the growth and sustainability and how do you see the future prospects for BTMU Malaysia in maintaining the consumer base?
NN : The banking industry is always faced with a number of challenges such as volatile market conditions; increased competition; increased customers’ requirements and sophistication for more innovative and customised financial solutions; complying with prudential regulations and international standards that resulted in greater challenge to manage the expectation of shareholders, regulators and customers’ expectations; and many more. Despite the challenging and uncertain external environment, we have managed to sustain our strong performance over the years by having the ability to embrace positive values in business dealings and to forge stronger ties with our customers . We have a very good track record of financial performance as well as a strong asset quality: backed by firm capital structure and productive workforce , we are well prepared to grasp the opportunities to further propel to the next phase of growth.
IB: IB readers will be glad to have closer look into your past experience in leading BTMU Malaysia towards stability and success . Based on your past experienced , what are the qualities one should possess in becoming a Chief Executive office or Leader of a world’s renowned banking brand?
NN : I started my career with then The Bank of Tokyo, Ltd. in 1987 right after graduation more than 27 years. From the start I knew that I wanted to work overseas and I worked my way up by taking various investment banking roles including two overseas postings in Los Angeles and New York, respectively. In 2011, upon my return to Tokyo, I was tasked with dual roles as Head of Planning & Administration Department, and General Manager of Social and Environmental Risk Assessment Office of Structured Finance Division, where I was responsible for strategic planning, human resource and profit/budget management as well as being responsible for social and environmental risk assessment for BTMU’s project finance transactions. In 2012, was promoted to Deputy General Manager of the bank’s Structured Finance Division, where I was responsible for oversight of overseas project and RCA finance, establishment of Asian Origination Team dedicated to promote infrastructure financing in Asia. Also, in this dual role as the General Manager of its Fund Investment Office, I managed the Bank’s existing private equity investment portfolio and also successfully closed a new investment in an ASEAN infrastructure fund. After a successful year in this role, I was then appointed as the President and Chief Executive Officer of Bank of Tokyo Mitsubishi UFJ (Malaysia) Berhad in 2013. I believe that with strong focus and determination to achieve goals set either for your own personal or career growth is very important especially for me in leading and driving the success 0f BTMU Malaysia.