Istisna Sukuk
CA-8.3.9
The asset may be constructed on behalf of an ultimate
customer or off-taker with whom theIslamic bank licensee enters into a parallel Istisna contract. In this case, there is acredit risk exposure to the ultimatecustomer for the payment due under the parallel contract. Thiscredit risk occurs upon commencement of the construction work by construction firm, until the whole amount or all the instalments (progress billings) are paid by the ultimatecustomer . The RW for this credit exposure is that of the ultimatecustomer , unless there is a guarantee, in which case the RW is that of the guarantor if lower.January 2015CA-8.3.10
The RW for Istisna Sukuk where there is no parallel Istisna is based on that of the issuer, unless a third party provides a guarantee, in which case the third party's RW (if lower than that of the issuer) will be applicable. In addition, a RW of 20% will be added to cater for the price risk to which the underlying Istisna is exposed.
January 2015CA-8.3.11
In the event the returns to the Sukuk holder are from the cash flow of the underlying assets, which fall under the category of "Exposure to Assets" Istisna, the RW must be based on the "supervisory slotting criteria" approach which carries RW of 70–250%.
January 2015CA-8.3.12
Refer to Section CA-3.4 on Istisna for detailed treatment.
January 2015
