DBS, the largest lender in South East Asia, and a group of Gulf country investors, has created Singapore’s first Islamic bank.

The Islamic Bank of Asia (IB Asia) will have an initial paid up capital of $418 million, with DBS contributing 60 per cent of the amount. Investors plan to raise the new Islamic bank's paid up capital in the next few weeks to $500 million, with DBS, which is also Singapore's biggest bank by assets, continuing to hold a majority stake.

IB Asia will focus on private banking, capital market and corporate finance as well commercial banking. DBS' partners come from prominent families and industrial groups from Gulf Cooperation Council countries. The GCC comprises Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates.

The new bank, a subsidiary of DBS, will have a nine-member board of directors, chaired by Abdulla Hasan Saif, the advisor for economic affairs to Bahrain's prime minister. Vince Cook, a veteran British banker with more than 20 years' experience in the Middle East, has been named chief executive.

DBS chief executive Jackson Tai said IB Asia will develop and distribute financial instruments for corporate and private banking clients in the Middle East and Asia.