IBANK 10.2.17 Providing credit enhancement

(1) Credit enhancement in a sukuk structure may be provided:
(a) internally, through an issuer-provided credit enhancement structure such as an excess spread reserve, over-collateralisation or a cash collateral account; or
(b) externally, through a third-party guarantee credit enhancement structure such as takaful or a cash collateral account.
(2) In an issuer-provided credit enhancement, the issuer would provide credit enhancement by assuming part of the credit risk of the underlying assets.
(3) In a third-party guarantee credit enhancement, a party (the guarantor) other than the issuer assumes (indefinitely or for a fixed period) all or part of the credit risk. The guarantor must not have a right of recourse to the originator.
(4) Unless the terms of the guarantee provide otherwise, a claim must first be made on the underlying assets before any claim is made against the guarantor.

Note For the treatment of credit enhancement provided by sukuk structure, see rule 10.4.5.
Inserted by QFCRA RM/2017-1 (as from 1st April 2017).