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  • Displaced Commercial Risk Management

    • RM-6.3.13

      Islamic bank licensees must have in place an appropriate framework for managing displaced commercial risk, where applicable.

      January 2013

    • RM-6.3.14

      Islamic bank licensees must have in place a policy and framework for managing the expectations of their shareholders and IAHs. Where market rates of returns of competitors' IAHs are higher than those of Islamic bank licensees' IAHs, the Islamic bank licensees must evaluate the nature and extent of the expectations of its IAHs and assess the amount of the gap between competitors' rates and their own IAHs' expected rates.

      January 2013

    • RM-6.3.15

      Islamic bank licensees must develop and maintain an informed judgment about an appropriate level of the balances of PER, bearing in mind that its essential function is to provide mitigation of displaced commercial risk. Some Islamic bank licensees must maintain the proportion relating to IAHs in this reserve within the IAHs equity, with the purpose of smoothing returns to IAHs, and in particular, to enhance their returns if these are below those of competitors. This implies that there will be years in which the balance of this reserve will be increased, and others in which it will be depleted.

      January 2013