Islamic bank licensees must have methodologies that enable them to quantify the risk involved in exposures to individual obligors or counterparties. Islamic bank licensees must also be able to analyse credit risk at the product and portfolio level, in order to identify any particular sensitivities or concentrations. The measurement of credit risk must take account of the following:
(a) The specific nature of the credit and its contractual and financial conditions (maturity, reference rate, etc.);
(b) The exposure profile until maturity in relation to potential market movements;
(c) The existence of collateral or guarantees; and
(d) The potential for default based on the internal risk rating.
The analysis of credit risk data must be undertaken at an appropriate frequency, with the results reviewed against relevant limits.
Added: June 2022
