Having sparked speculation over a potential exit from Shariah compliant finance following the departure of the head of its Islamic operations in January last year, Barclays recently renewed its efforts in the sector with a window license in the Dubai International Financial Center (DIFC).
In an environment where investment banking remains depressed and industry players are increasingly pushed to look outside the local market for business, the move to re-set its Islamic business in Dubai is a bold one. Nonetheless, provided it can capitalize on its global footprint, there remains potential for the UK-based bank to make its mark in Islamic finance.
Clearing the air
The market went abuzz early last year on news that Harris Irfan, who headed Barclay’s Islamic finance operations via Barclays Capital and Barclays Wealth in Dubai, had left the banking group. Market talk was further spurred by speculation that Irfan parted with the bank on less-than-friendly terms.
However, reports that the banking group had decided to retreat from the Shariah compliant space in an effort to refocus on its core business proved premature; with Barclays appointing Dr Dominic Selwood as a director in charge of its Islamic products and services under Barclays Capital shortly after Irfan’s departure.
Islamic Finance news understands that Barclays maintains there was no ill-feeling leading to Irfan’s exit; and that his resignation was the result of his decision to pursue commercial ventures of his own, setting up Islamic finance advisory firm Cordoba Capital.
It is also learnt that the bank’s silence on the direction of its Islamic business at the time was the result of a gag order imposed on it in line with its application to the Dubai Financial Services Authority (DFSA) for its Islamic window license in the DIFC.
New beginnings
Followings its period of laying low, it was announced in September last year that Barclays Bank had received approval from the DFSA to operate an Islamic window in the DIFC. The license enables the bank to run its global Islamic products team in the financial center; utilizing the jurisdiction as a springboard for its Islamic financial services.
Islamic Finance news understands that the bank is now looking at opportunities to arrange transactions in the Sukuk market, while preparing offerings in the structured products space. Selwood has also reportedly said that the bank will look at areas including liquidity and risk management and hedging products, with a Shariah compliant structured notes program also on the cards.
Commenting on the receipt of the license at the time John Vitalo, CEO of Barclays Middle East and North Africa, reiterated the British bank’s presence in Islamic finance; while Selwood said that: “Operating from a DIFC Islamic platform will greatly enhance our ability to meet the needs of our regional and international clients seeking Shariah compliant products and services.”
Global focus
A focus on regional and global business will serve Barclays well as industry players note a lack of new corporate and investment banking business in Dubai. Furthermore, with experience in managing deals such as the Malaysian government’s US$1.25 billion global Sukuk and a US$1.4 billion project financing for the Jubail Refinery in 2010, the banking group appears well-positioned to take on international deals.
In addition, the bank has also made an effort to expand its Shariah compliant banking presence around the world. In July last year it launched an exclusively Shariah compliant branch in Kenya offering vehicle financing and current accounts, among other things. The new branch represents a continuation of its pioneer effort in Kenya’s Islamic finance market; where it first introduced its Shariah compliant current account product in the country in 2005.
Despite the pause in its Islamic business for much of last year, Barclays appears to be approaching the market with renewed vigour and may once again emerge as a name to look out for in Islamic finance. — EB