IBANK 6.6.12 Shari'a-Compliant Hedging Instruments

(1) In the measurement of profit rate risk in the trading book, an Islamic banking business firm must include profit rate Shari'a-compliant hedging instruments and off-balance-sheet instruments in the trading book if those instruments react to changes in profit rates.
(2) The firm must convert Shari'a-compliant hedging instruments into positions in the relevant underlying to enable the firm to calculate specific and general risk capital charges. To determine the capital charges, the value of the positions must be the market value of the underlying or notional underlying.
(3) Positions in Shari'a-compliant hedging instruments are subject to charges for general risk in the same way as cash positions. However, matched positions are exempt from the charges if the positions satisfy the criteria in rule 6.6.13 or 6.6.14.
(4) Positions in Shari'a-compliant hedging instruments must be allocated to a maturity ladder and treated in accordance with this rule and the maturity method.
Derived from QFCRA RM/2015-2 (as from 1st January 2016).