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).