IBANK 8.4.30 Treatment of net Shari'a-compliant hedging cash outflows

(1) The runoff rate for net Shari'a-compliant hedging cash outflows is 100%.
(2) The firm must calculate those outflows in accordance with its usual valuation methods. The outflows may be calculated on a net basis by counterparty (that is, inflows offsetting outflows) only if a valid master netting agreement exists.
(3) From the calculation, the firm must exclude liquidity needs that would result from increased collateral needs because of falls in the value of collateral lodged or market value movements.

Note For how to treat such liquidity needs, see rules 8.4.32 and 8.4.36.
(4) The firm must assume that an option will be exercised if it is in the money.
(5) If Shari'a-compliant hedging payments are collateralised by HQLA, the cash outflows are to be calculated net of any corresponding cash or collateral inflows that would result, all other things being equal, from contractual obligations to lodge cash or collateral with the firm.
(6) However, subrule (5) applies only if, after the collateral were received, the firm would be legally entitled and operationally able to re-hypothecate it.
Inserted by QFCRA RM/2018-2 (as from 1st May 2018).