Elaf Islamic Bank and China Banking U.S.A ? IRAN ?
China's Bank of Kunlun
At the end of May, senior managers of China National Petroleum Corporation (CNPC) told National Finance Weekly that they were waiting on permission from China Banking Regulatory Commission (CBRC) to establish Kunlun Financial Leasing Company (Kunlun).
According to a member of the assets division of CNPC, the government offered several beneficial policies to support Kunlun. CNPC contributes 5.4 billion yuan (US$790 million), equal to 90 percent of Kunlun's capital. The remaining 10 percent comes from Chongqing Machinery & Electronics Holding (Group) Co., Ltd. (CQMEG). CQMEG reported to the public that Kunlun would mainly engage in equipment leasing. Their clients include small and middle-sized enterprises, large-scale equipment manufacturers, and the gas stations and oil fields of CNPC.
When Kunlun gains approval, CNPC's financial empire will be completed. Its subsidiary companies cover all financial sectors including asset management, life insurance, property and casualty insurance, securities, insurance agency, commercial bank, trust and financial leasing. CNPC began building the empire as early as 1995 with the establishment of its financing company. Its shareholders were CNPC's subsidiaries. The company worked as an internal bank serving the group. CNPC cooperated with the Italian insurance company Assicurazioni Generali to found Generali China Insurance Co., Ltd. in 2002. In 2007, the corporation expanded further when they gained permission to control the Karamay City Commercial Bank and bought a trust company in Ningbo. Among all the state-owned corporations dabbling in finance, CNPC covers the widest range. Company insiders said they aimed at promoting business with the help of capital market and financial tools. Feng Yuewei, an analyst of CNPC Foundation Forum, said it was a trend in recent years to merge finance and industry. "Current global economy is actually controlled by international financial capital. Oil and gas have financial values," he said. "CNPC needs a capital operation platform to compete on the world stage."
The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) also follows this practice. Li Wei, the vice chairman of SASAC, said, "The merge of finance and industry is the future of Chinese transnational enterprises." At a conference in Sanya last year, CNPC stressed that their financial sector should focus on serving its own gas and oil business. Many financial companies work alongside CNPC's affiliates. Their primary concern now is to expand the size and improve the quality of these companies to fulfill the corporation's need. However, CNPC's power in finance causes worry. Yu Huabin, president of the Metallurgy Finance Department at China Minsheng Bank, said, "CNPC is an ideal client itself for many banks. Now they will lose it as CNPC's own banks are established. Monopoly enterprise is blessed with natural advantages in the finance field. The scale of China's financial market is roughly [fixed]. CNPC will surely take away some profits."
CNPC's 2009 annual report shows that the corporation has more than 2 trillion yuan (US$292 billion) of assets. This puts forward a question about supervision. Yu expressed this doubt. "How can it avoid related transaction?" Yu asked. "How can the relevant department supervise the corporation as it has so many different businesses?" SASAC is the direct supervision institute of CNPC. But it only takes charge of maintenance and appreciation of state-owned corporations. Financial supervision is handled by People's Bank of China, CBRC, China Securities Regulatory Commission, and China Insurance Regulatory Commission. However, the complexity of CNPC's financial sector blurs the responsibility of supervision. It is not clear yet which one should shoulder the task. Though CBRC approves of CNPC's control of the Karamay bank, it doesn't loosen limitations. Until now, CNPC only opened one branch in Urumqi, which is far from CNPC's original goal of a national chain of banks. After the walls between industry and financial capital are broken by CNPC, problems in either of the two sectors will cause a severely harmful chain reaction if supervision is not properly applied.
Thus, according to industry observers, financial supervision departments need to synergistically supervise the corporation and seamlessly connect with each other. Moreover, building a mixed financial supervision system should be considered by the government.
Elaf Islamic Bank listed on the Iraqi Stock Exchange in 2011, was incorporated as "Al Baraka for Investment & Finance" in 2001 with an initial paid up capital of IQD 2 billion. When in 2007 the bank transformed its operating structure to Islamic Banking from Conventional Banking, the name was also changed to Elaf Islamic Bank for Shariah compliant Islamic Banking in order to tap into the enormous growth of Islamic Banking, with an increase in paid up equity share capital of IQD 8 billion. Originally, the bank was promoted by a group of high net worth businessmen from a reputed business community in Iraq. The tangible equity share capital was augmented to IQD 10 billion in 2009, to IQD 50 billion in 2010 and to IQD 100 billion in 2011. The bank has no debt in its capital structure and has a risk adjusted capital adequacy ratio of 18% which is above the limit set by the Central Bank of Iraq and the Basel II Accord.
The Bank is listed with the ticker BELF on Iraq Stock Exchange.