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RM-4.3.8

Where available valuation methodologies are deficient, Islamic bank licensees must assess the need to:

(a) Allocate funds to cover risks resulting from illiquidity, new assets and uncertainty in assumptions underlying valuation and realisation; and
(b) Establish a contractual agreement with the counterparty specifying the methods to be used in valuing the assets.9

9 It should be noted that similar arrangements are suggested to mitigate contract cancellation, which is explained under RM-2 Credit Risk.

January 2013