IBANK 10.3.9 Treatment of Salam Sukuk with Parallel Salam
(1) The risk-weight for salam sukuk with parallel salam must be based on the counterparty (salam supplier) unless the salam capital is guaranteed by a third party.
(2) If the salam capital is guaranteed by a third party, the risk-weight must be based on the guarantor, but only if the guarantor's risk-weight is lower than that of the salam supplier. The risk-weight for an unrated salam supplier or an unrated guarantor is 100%.
(3) A salam sukuk issuance that is structured with an undertaking from the issuer that the underlying commodity will be sold to a third party at a specified selling price (by means of a parallel salam contract) must carry the risk-weight of the third party.
(4) There is no capital charge for market risk that consists of basis and forward gap risks (namely, the risk that the hedge may be impaired because the underlying commodity delivered may be of inferior quality or may be delivered later than the contractual date). This is because the underlying commodity is normally traded on an exchange that eliminates the risk of late delivery, non-delivery or delivery of a commodity that is of inferior quality.
(5) The capital charge for salam sukuk with a parallel salam contract or other hedge is 15% on the net position of the salam exposures plus 3% on the gross position of those exposures.
|Derived from QFCRA RM/2015-2 (as from 1st January 2016).|