• IBANK Division 6.6.A IBANK Division 6.6.A General

    • IBANK 6.6.1 Relation to Market Risk

      In measuring its market risk, an Islamic banking business firm must include the risk of holding or taking positions in sukuk and other Shari'a-compliant debt securities and profit-rate-related instruments that are held in the trading book (profit rate risk in the trading book).

      Derived from QFCRA RM/2015-2 (as from 1st January 2016).

    • IBANK 6.6.2 What to Include in Profit Rate Risk

      (1) The measurement of profit rate risk in the trading book applies to all fixed-rate and floating-rate debt securities and other profit-rate-related instruments that exhibit market behaviour similar to debt securities.

      Examples
      •   fixed-rate and floating-rate sukuk
      •   non-convertible preference shares
      •   convertible sukuk that trade like debt securities.
      (2) A debt security that is the subj ect of a repurchase or securities lending agreement is taken to be owned by the lender of the security.
      (3) In calculating the capital charge for profit rate risk in the trading book, an Islamic banking business firm must include profit rate exposures arising from binding unilateral promises in foreign exchange transactions and forward sales and purchases of commodities and equities.
      (4) The firm must also include any profit rate exposures arising from foreign exchange, commodity and equity positions.

      Note For profit rate exposures arising from binding unilateral promises, transactions or exposures in:
      •   foreign currencies, see rule 6.2.1
      •   commodities, see rule 6.4.1
      •   equities, see rule 6.5.1.
      Derived from QFCRA RM/2015-2 (as from 1st January 2016).

    • IBANK 6.6.3 Capital Charge — Profit Rate Risk

      The capital charge for profit rate risk in the trading book consists of 2 separately calculated charges:

      (a) a charge for the specific risk of holding a long or short position in an individual instrument; and
      (b) a charge for the general risk of holding a long or short position in the market as a whole.

      Note 1 The capital charge for general risk is for the risk of loss arising from changes in market profit rates.

      Note 2 To determine the capital charge for Shari'a-compliant hedging instrument, see rule 6.6.12.
      Derived from QFCRA RM/2015-2 (as from 1st January 2016).