IBANK 6.2.1 Relation to Market Risk

(1) In measuring its market risk, an Islamic banking business firm must include the risk of holding or taking positions in foreign currencies, gold and silver (foreign exchange risk). Foreign exchange risk may arise from the firm's trading in the foreign exchange market and other markets; it may also arise from non-trading activities that are denominated in a foreign currency.

Guidance
1 If an Islamic banking business firm is exposed to profit rate risk on positions in foreign currencies, gold and silver, the firm must include the relevant profit rate positions in the calculation of profit rate risk in the trading book-see rule 6.6.2(4).
2 Unlike Basel II, silver and gold are treated under Shari'a as foreign exchange positions (rather than as commodity positions). In Basel II, only gold is treated in that way.
(2) If foreign currency is to be received or delivered under a binding unilateral promise, the firm must report any profit rate exposure from the other leg of the contract in accordance with Part 6.6 (profit rate risk in the trading book).
(3) If gold or silver is to be received or delivered under a binding unilateral promise, the firm must report any foreign currency or profit rate exposure from the other leg of the contract in accordance with this Part or Part 6.6, as the case requires.
Derived from QFCRA RM/2015-2 (as from 1st January 2016).