IBANK 8.4.47 Treatment of net Shari'a-compliant hedging cash inflows

(1) The inflow rate for net Shari'a-compliant hedging cash inflows is 100%.
(2) The firm must calculate those inflows in accordance with its usual valuation methods. The inflows may be calculated on a net basis by counterparty (that is, inflows offset 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 market value movements or falls in the value of collateral lodged.
(4) The firm must assume that an option will be exercised if it is in the money to the buyer.
(5) If Shari'a-compliant hedging cash inflows are collateralised by HQLA, the inflows are to be calculated net of any corresponding cash or collateral outflows that would result from contractual obligations for the firm to lodge cash or collateral.
(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).