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  • Murabahah and Non-binding MPO

    • CA-3.2.20

      In the case of an asset in possession in a Murabahah transaction and an asset acquired specifically for resale to a customer in a non-binding MPO transaction, the asset must be treated as inventory of the Islamic bank licensee and, using the simplified approach, the capital charge for such a market risk exposure is 15% of the amount of the position (carrying value). The 15% capital charge is also applicable to assets held by an Islamic bank licensee in respect of incomplete non-binding MPO transactions at the end of a financial period.

      January 2015

    • CA-3.2.21

      Assets in possession on a 'sale or return' basis (with such an option included in the contract) are treated as accounts receivable from the vendor and as such would be offset against the related accounts payable to the vendor. If these accounts payable have been settled, the assets must attract a RW based on rating of the vendor (100% in case of unrated), subject to (a) the availability of documentation evidencing such an arrangement with the vendor, and (b) the period for returning the assets to the vendor not having been exceeded. If the above conditions are not satisfied, capital charge will be provided as per Paragraph CA-3.2.20.

      January 2015