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CM-1.3.2

Islamic bank licensees must receive sufficient information to enable a comprehensive assessment of the true risk profile of the obligor or counterparty. Depending on the type of credit exposure and the nature of the credit relationship to date, the factors to be considered and documented in approving credits must include:

(a) The purpose of the credit and sources of repayment;
(b) The current risk profile (including the nature and aggregate amounts of risks) of the obligor or counterparty and collateral and its sensitivity to economic and market developments;
(c) The obligor’s repayment history and current capacity to repay, based on historical financial trends and future cash flow projections, under various scenarios;
(d) For commercial credits, the obligor’s business expertise and the status of the obligor’s economic sector and its position within that sector;
(e) The proposed terms and conditions of the credit, including covenants designed to limit changes in the future risk profile of the obligor;
(f) The legal structure of the entity to which credit is granted and any associated implications; and
(g) Where applicable, the adequacy and enforceability of collateral or guarantees, including under various scenarios.
Added: June 2022