Asia-focused Standard Chartered Bank has applied for a license to set up a separate Islamic banking unit in Malaysia, aiming to capture growth in a business that has escaped global credit turmoil.
Julian Wynter, managing director of the bank's Malaysian arm, told a news conference the credit crisis has not infected its Islamic finance business despite the uncertainty in global financial markets.

"We haven't seen any stress in our Islamic portfolio. Hard to make a judgement about the future," he said.

Standard Chartered had $1.4 billion (699 million pounds) of Islamic banking assets in Malaysia at the end of 2007, more than double the year ago period, he said.

"We look forward to the banking license from Bank Negara to expand our scale and breath of our Islamic financing capabilities," Wynter said.

HSBC and Singapore's third-biggest lender, Oversea-Chinese Banking Corp , have already received regulatory approval to set up Islamic banking units in Malaysia.

Malaysia, home to the world's largest Islamic bond market, aims to become an international centre for Islamic finance and has been luring local and foreign banks to put their Islamic banking businesses under standalone subsidiaries.

Islamic financial institutions operate in compliance with sharia, or Islamic law, which calls for a ban on charging interest and investing in prohibited industries such as alcohol, pornography and gambling.

Wynter said the bank expects the Malaysian economy to grow 4.2 percent in 2008, below the official forecast for a 6-6.5 percent growth, as a U.S. economic slowdown could hurt global growth.

But Wynter said the unexpected election results in Malaysia

would not derail Malaysia's growth prospects. Elections earlier this month saw Prime Minister Abdullah Ahmad Badawi's ruling party lose its two-third majority and five states to the opposition party

"The markets have reacted a little to the uncertainty. But we have a positive outlook for Malaysia," he said