Swiss Sharia bank courts Gulf petrodollars

Experts estimate that Islamic financial institutions manage around $750 billion globally Keystone

The first Islamic private bank launched in Switzerland is hoping to tap into the $200 billion (SFr252 billion) of Arab funds currently managed by Geneva institutions.

The Faisal Private Bank, which opened its doors for business in Geneva last week after being granted a Swiss banking licence, will be the first in Switzerland to operate according to Sharia principles.

Until now, there have been limited investment options for wealthy Arabs wanting to invest in Switzerland in accordance with Islam. The Faisal Private Bank now hopes to mine the rich potential of this fast-growing market.

Financial agency Moody’s Investors Service estimates that Islamic financial institutions manage around $750 billion globally.

“The launch of the bank is a landmark development towards building the bridge between two distinct yet complementary traditions: Swiss private banking excellence and financial solutions based on ethics derived from Sharia,” Faisal Private Bank said in a statement.

Other European countries also have Sharia banks, but these mainly cater to immigrants, unlike the Faisal Private Bank that will target non-Swiss residents. The bank, formerly the Geneva-based Faisal Finance that traditionally looked after small investors, is turning its attention to the huge petrodollar fortunes from the Gulf region.

“We hope to double our investment fund over the next two to three years worth SFr1.25 billion,” Khalid Janahi, Faisal’s chairman, told the Geneva-based Le Temps newspaper.

Wooing customers

“The Swiss banking sector has been courageous as it is not traditionally very innovative,” added Alexander Theocharides, head of Wealth Management at Faisal Private Bank.

Swiss banks, including the country’s largest bank UBS, already have branches in the Middle East offering Sharia-compliant financial products to wealthy Arabs, and demand for such services has risen significantly in recent years.

But Swiss banks trying to attract Arab investors have been accused of not reacting quickly enough in Switzerland, as clients from the Gulf are known to prefer to keep part of their fortunes safe outside the region.

And when choosing between such services offered by the major banks and financial investments from Sharia banks, Anthony Travis, a British-Swiss financial expert working in Geneva, said most Muslims who respect Islamic principles would probably favour a Sharia bank.

“If I was a Muslim really keen to avoid usury and respect religious rules, and someone who didn’t want my money to be invested in arms, tobacco, alcohol or other things prohibited by my faith, I would choose an Islamic bank,” he declared.

But for many Arab investors the biggest selling-point remains Switzerland’s stable sociopolitical climate.

“Faisal Private Bank certainly adds value by providing its clientele and potential partners with their own bank within the safety of Switzerland,” said Janahi.

swissinfo

In brief

Islamic banking offers financial products, which conform to Sharia law, as laid down in the Koran.

Since the taking of interest is forbidden, banks use a system based on the sharing of capital gains.

Sharia-compliant banking also forbids investments in companies involved in gambling, alcohol, tobacco, pornography and pork production.

International bankers have cottoned on quickly to the interest in wealth management according to Sharia law and offer such services.

Swiss banks offer such services in private banking but cannot be called Islamic banks. Only Arab banks or banks from Islamic countries can call themselves Islamic.