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CA-3.11.2

Islamic bank licensees can be involved in CMT-based financing in the following forms:18

(a) CMT for interbank operations for managing short-term liquidity surplus (i.e. selling and buying of Shari'a-compliant commodities through Murabahah transactions, which is commonly termed "placement" in conventional institutions) or where the counterparty is the central bank or monetary authority offering a Shari'a-compliant lender of last resort and/or a standing facility for effective liquidity management. Such placement/financing is referred to as "commodity Murabahah for liquid funds (CMLF)"; or19
(b) CMT for providing financing to a counterparty by a longer-term commodity Murabahah where the counterparty immediately sells the commodities on the spot market is referred to as "commodity Murabahah financing (CMF)".

18 Please see IFSB GN-2 (Guidance Note on CMT, issued in December 2010) for details on various risk management and capital adequacy aspects of CMT that can be conducted on both sides of the balance sheet.

19 CMLF is also referred to as "commodity Murabahah investment" by some banks in the industry. Strictly speaking, Murabahah should not be classified as an investment, since in fact it is a type of receivable.

January 2015