British-based banking giant Standard Chartered is "actively looking" at setting up an Islamic banking subsidiary and may submit its application to the central bank for approval.

"Hopefully, we will apply and if we do decide to apply we will do so in the next twelve months," said Julian Wynter, chief executive officer of Standard Chartered Bank Malaysia.

Wynter said the bank was sorting out several issues before it decides whether to go ahead.

The government wants to develop Malaysia as an Islamic financial hub.

It recently announced a package of incentives to promote the sector, including allowing foreigners to wholly own Islamic fund management companies.

They will also be allowed to invest all their assets abroad and be given income tax exemption on all fees received for Islamic fund management activities.