• IBANK 10.2.5 IBANK 10.2.5 Collateral security structure

    (1) A collateral security structure may be used in some sukuk, such as those based on project financing. The security interest arising from the structure must be perfected (or perfectible) and that interest must be the only claim on the collateral.

    Note In this rule, collateral:
    (a) arises from the structure (for example, the asset or project that is the subject of financing in a joint venture between the SPE and another party); and
    (b) is used to mitigate the underlying exposures of the securitisation.
    (2) The collateral security structure must be supported by a written and reasoned opinion of a qualified legal counsel. The legal opinion must conclude that the security interest is perfected (or perfectible) and that there are no prior or subsequent claims on the collateral.
    (3) The legal opinion must address:
    (a) the nature of the security interest;
    (b) the enforceability of the security interest against third parties;
    (c) perfection requirements (such as notices and registration); and
    (d) the effects of the issuer's bankruptcy on perfection.
    Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.5 Guidance

      The Regulatory Authority expects the legal opinion to consider that, in many jurisdictions:

      •    rahn (mortgage or other pledge of assets) is possessory in nature so as to make perfection a particularly difficult issue
      •    bankruptcy laws, the concept of perfection and the priorities in the distribution of assets are not well developed.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).