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  • Exposure to Customer

    • Istisna'a with Parallel Istisna'a

      • CA-3.4.34

        There is no capital charge for market risk to be applied in addition to provisions on credit risk, subject to there being no provisions in the Istisna'a contract that allow the supplier to increase or vary its selling price to the Islamic bank licensee, under unusual circumstances. Any variations in a parallel Istisna'a contract that are reflected in the corresponding Istisna'a contract which effectively transfers the whole of the price risk to a parallel Istisna'a customer (ultimate buyer) are also eligible for this treatment.

        January 2015

    • Istisna'a without Parallel Istisna'a

      • CA-3.4.35

        In Istisna'a without Parallel Istisna'a, the Islamic bank licensee is making progress payments to the Istisna'a supplier, thereby acquiring title to WIP inventory. The WIP inventory is exposed to price risk. As there is no parallel Istisna'a sale to an ultimate customer, there is no credit risk.

        January 2015

      • CA-3.4.36

        The WIP receives a capital charge appropriate to inventory — 15%.

        January 2015