• IBANK Division 10.2.C IBANK Division 10.2.C Risk management of securitisation

    Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.12 Role of governing body — securitisation

      (1) An Islamic banking business firm's governing body must oversee the firm's securitisation exposures.
      (2) The governing body:
      (a) must understand, and set the scope and purpose of, the firm's sukuk securitisation; and
      (b) must be aware of the risks and other implications associated with sukuk securitisation.
      (3) The governing body must ensure that the firm's senior management establishes and implements securitisation policies that include:
      (a) appropriate risk management systems to identify, measure, monitor, report on and control or mitigate the risks arising from the firm's involvement in securitisation; and
      (b) how the firm monitors, and reports on, the effect of securitisation on its risk profile.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.13 Policies — Shari'a compliance

      An Islamic banking business firm must establish and implement policies to ensure that the firm's offer documents for sukuk are sufficiently clear and precise to eliminate the risk of gharar or any other activity prohibited by Shari'a.

      Note Under rule 7.2.1 an Islamic banking business firm must establish and implement policies to ensure that its business is conducted in accordance with Shari'a. The policies must include effective and comprehensive procedures so that the firm complies with Shari'a (in general and in relation to the requirements for Islamic financial contracts) and with the fatwas, rulings and guidelines issued by its Shari'a supervisory board.

      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.14 Risk management of complex sukuk

      (1) For the issuance of complex sukuk structured in the form of convertible sukuk or hybrid sukuk, an Islamic banking business firm must evaluate:
      (a) the risks underlying the issuance;
      (b) the nature of the contracts or structures being combined; and
      (c) any legal risks applicable to the structure.

      Example of legal risk

      risk arising from the interaction between a Shari'a contract and civil law
      (2) Other issues that the firm must evaluate include:
      (a) whether the underlying assets comply with Shari'a;
      (b) the recourse available to holders:
      (i) against the underlying assets;
      (ii) against an obligor such as the issuer or a guarantor; or
      (iii) for asset-based sukuk — against the assets or obligors in subparagraph (i) or (ii), or against the originator (who retained legal title to the assets); and
      (c) valuation and provisioning required (if necessary) for tranches held by the firm.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.15 Relation to internal capital adequacy assessment

      An Islamic banking business firm must be able to demonstrate to the Regulatory Authority that the firm's ICAAP captures the following specific risks relating to securitisation:

      (a) credit risk, market risk, liquidity risk and reputation risk for each securitisation exposure;
      (b) potential delinquencies and losses on the exposures;
      (c) risks arising from the provision of credit enhancements and liquidity facilities; and
      (d) risks arising from guarantees provided by monoline insurers and other third parties.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).