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  • Operational Requirements for Credit Analysis

    • CA-8.2.23

      Islamic bank licensees must carry out the credit analysis of their securitisation exposure based on the following criteria, in order to be allowed to use the risk weights in Section CA-8.3. If an Islamic bank licensee is unable to perform the due diligence and maintain the information specified in this paragraph, it will be required to risk weight the securitisation exposure at 1,250%. The criteria are applicable to securitisation exposures of Islamic bank licensees both in the banking and trading book:

      (a) An Islamic bank licensee must have a clear understanding of the nature and features of its individual securitisation exposures, including the risk characteristics of the pools underlying such exposure on an ongoing basis. This requirement applies to both on-and off-balance sheet securitisation exposures;
      (b) As the payments to Sukuk holders are dependent on the performance of underlying assets, an Islamic bank licensee must be able to assess the performance information on an ongoing basis; and
      (c) An Islamic bank licensee must be able to thoroughly understand all the structural features of a Sukuk that can materially impact the performance of its exposures to the transaction. Such exposures may include credit enhancements, liquidity enhancements, triggers, and deal-specific default definitions.
      January 2015

    • CA-8.2.24

      The capital treatment of a securitisation exposure must be determined on the basis of the economic substance rather than the legal form of the securitisation structure. Islamic bank licensees must consult with the CBB when there is uncertainty about whether a given transaction should be considered a securitisation.

      January 2015