Wednesday, 24th April 2024 - Manama, Kingdom of Bahrain: The International Islamic Financial Market (IIFM) and the Participation Banks Association of Türkiye (TKBB) announced the release of Turkish translated versions of six (6) IIFM Published Standards relating to Islamic Hedging and Liquidity Management segments.
This initiative is part of IIFM and TKBB collaboration for the development of the participation banking sector in Türkiye and globally. The translated versions will benefit participation banks to transact based on high-level globally standardized documentation and product confirmation templates.
The selection of these translated standards relating to Islamic Hedging and Liquidity Management was a result of a consultative exercise undertaken by TKBB in coordination with IIFM given the domestic requirements to mitigate risk factors such as currency risk as well as the need for alternative liquidity management tools.
On this occasion, Mr. Khalid Hamad Al-Hamad, Chairman of IIFM said, “IIFM standards have gained recognition around the world and now the standards are used in over twenty (20) jurisdictions by financial institutions, multilateral bodies and other market participants including regulatory bodies. IIFM standards are assisting the orderly development and unification of the cross border as well as domestic markets. Also, the standards are equally helping in capacity building of professionals who are driving the industry forward”.
Mr. İsmail Vural, Secretary General of TKBB said, ‘’This translation project has been initiated together with IIFM in order to create good practice examples for the participation finance sector in Türkiye and other beneficiaries. This valuable set of financial documents translated into Turkish can be used by institutions that want to diversify their portfolios and accelerate their processes and can also be used as an important international reference source by many stakeholders in the sector. We consider this collaboration as an important step towards the development of the participation finance ecosystem. We wish to continue our active dialogue with IIFM for further collaboration”.
Mr. Ijlal Ahmed Alvi, Chief Executive of IIFM said, “I am confident that this cooperation will continue for not only translation of other IIFM published standards but also in other areas for the progress of the Islamic finance industry including the Turkish participation banking sector which is one of the important markets globally”. He also thanked the TKBB, on behalf of IIFM Board of Directors, for its valuable efforts and cooperation relating to this important initiative.
Mrs. Fatma Çınar, Director of TKBB said, ‘’We believe that the IIFM standards translation project carried out by the Association is important for increasing cooperation with both local and international financial institutions in countries within the ecosystem in the Islamic finance industry and would be good practice example for other countries. The published translated documentation will also contribute significantly to the knowledge and equipment of employees in the field of liquidity management in process management and stakeholder communication. We are very pleased to make this sophisticated source documentation available to all our stakeholders in our country.’’
The details of the newly Turkish translated Standards are as follows:
1) Standard No. 1 - IIFM Master Agreements for Treasury Placement
This is the industry’s first ever globally standardized documentation and was developed for the purpose of liquidity management based on commonly used Commodity Murabahah and Agency contracts. The widely acceptable Shari’ah-compliant mechanisms are defined in the Structure Memorandum.
2) Standard No. 2 - ISDA/IIFM Tahawwut (Hedging) Master Agreement
This is the industry’s first joint globally standardized documentation developed with collaboration between two International standard-setting organizations. It is a framework document designed to facilitate risk management functions of institutions active in Islamic finance. The risk mitigation product confirmations and credit support documentation fall under its terms and conditions. The documentation is supported by an explanatory memorandum.
3) Standard No. 5 - IIFM Interbank Unrestricted Master Investment Wakalah Agreement
This Standard documentation provides an alternative Islamic liquidity management instrument for institutions to transact without guaranteeing the principal and profit. The documentation is robust and provides operational, legal and Shari’ah certainty. It is supported by a detailed operational guidance memorandum and an accounting assessment.
4) Standard No. 6 – IIFM Master Collateralized Murabahah Agreement
In order to provide the industry with an alternative to conventional Repo, the standard agreement provides a mechanism for access to liquidity on a collateralized basis (based on the Shari’ah principle of Ar’Rahn) utilizing Sukuk and other Islamic securities portfolio as collateral. The standard agreement is accompanied by an operational guidance memorandum which covers the operational procedures.
5) Standard No. 8 – ISDA/IIFM Master Terms and Conditions for an Islamic Foreign Exchange Forward (Single Binding Wa’ad based structure)
IFX Forward template is designed to be used for bilateral deliverable FX Forward transactions subject to a Tahawwut Master Agreement entered into between the parties. Its objective is to minimize the impact of currency rate fluctuation and volatility for stable business operations.
7) Standard No. 15 – IIFM Standard Shari’ah-Compliant Structuring Solutions for Risk-Free Rates (RFRs) Implementation for Murabahah and Ijarah Transactions
The main objective of the IIFM RFR’s Implementation Solutions for Murabahah and Ijarah Financing Transactions is to facilitate and ease the implementation of the new Risk-Free Rate’s (RFR’s) in a Shari‘ah-compliant manner.