LM-12.4.21

Shari'a-compliant hedging contract assets are calculated first based on the replacement cost for Shari'a-compliant hedging contracts (obtained by marking to market) where the contract has a positive value. When an eligible bilateral netting contract is in place that meets the conditions as specified, as per the 'bilateral netting agreements' conditions specified in Appendix F, the replacement cost for the set of Shari'a-compliant hedging exposures covered by the contract will be the net replacement cost.

LM-12.4.22

In calculating NSFR Shari'a-compliant hedging contract assets, collateral received in connection with Shari'a-compliant hedging contracts may not offset the positive replacement cost amount, regardless of whether or not netting is permitted under the bank's operative accounting or risk-based framework, unless it is received in the form of a cash variation margin and meets the conditions as specified in Appendix G¹⁴ . Any remaining balance sheet liability associated with; (a) variation margin received that does not meet the criteria above, or (b) initial margin received, may not offset Shari'a-compliant hedging contract assets and must be assigned a 0 percent ASF factor.

¹⁴ NSFR Shari'a-compliant hedging contract assets = (Shari'a-compliant hedging contract assets)—(cash collateral received as variation margin on Shari'a-compliant hedging contract assets).