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).