• IBANK Division 10.2.E IBANK Division 10.2.E External ratings

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

    • IBANK 10.2.22 External credit rating agencies

      (1) Depending on the securitisation structure, 1 or more ECRAs may be involved in rating the sukuk securitisation. An Islamic banking business firm must use only ECRAs to risk-weight securitisation exposures.

      Note For the use of ECRAs in general, see rules 4.3.7 and rule 4.3.8.
      (2) Because investors are not concerned with the credit strength of the originator or issuer in a sukuk securitisation, an ECRA that is rating the sukuk must assess the quality of the underlying pool of assets and the robustness of the structure. In assigning a rating, the ECRA must consider:
      (a) the quality of the asset portfolio;
      (b) the solvency of the originator or the issuer;
      (c) the perfection of the legal structure;
      (d) the tax risks;
      (e) the title to the securitised assets;
      (f) the risks of set-off and prepayment;
      (g) the nature and structure of the sukuk.

      Note A change in the rating for a sukuk issue may be due to deterioration in the performance of the collateral, heavy utilisation of credit enhancement or downgrade of a supporting rating (for example, a takaful company that was underwriting takaful on the pool of the assets).
      (3) For asset-based sukuk (where only beneficial ownership of the underlying assets is transferred), the rating will depend on a combined view of:
      (a) the strength of the rating of the originator or issuer; and
      (b) the quality of the asset pool.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.23 IBANK 10.2.23 Ratings must be publicly available

      (1) A credit rating assigned by an ECRA must be publicly available.
      (2) The loss and cash flow analysis for the securitisation, and the sensitivity of the rating to changes in the assumptions on which it was made, must also be publicly available.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

      • IBANK 10.2.23 Guidance

        Information required under this rule should be published in an accessible form for free. Information that is made available only to the parties to a securitisation is not considered publicly available.

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

    • IBANK 10.2.24 Ratings must be applied consistently

      (1) A credit rating assigned by an ECRA must be applied consistently across a given type of securitisation exposure.
      (2) An Islamic banking business firm must not use an ECRA's (the first ECRA's) credit rating for 1 or more tranches and another ECRA's rating for other tranches within the same securitisation structure (whether or not those other tranches are rated by the first ECRA).

      Note Under rule 4.3.8:
      (a) if there are 2 different assessments by ECRAs, the higher risk-weight must be applied; and
      (b) if there are 3 or more different assessments by ECRAs, the assessments corresponding to the 2 lowest risk-weights should be referred to and the higher of those 2 risk-weights must be applied.
      Inserted by QFCRA RM/2017-1 (as from 1st April 2017).

    • IBANK 10.2.25 Effect of ratings of issuer and issue

      If the issuer of sukuk is rated (but the issue is not), any eligible collateral may be used for credit risk mitigation. If the issue is rated, collateral included as part of the sukuk structure must not be used for credit risk mitigation.

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