Legal, Documentation & Risk Issues
for Islamic Treasury & Hedging Products

SIDC CPE - accredited: 10 CPE Points
Date: 22nd February 2017 Venue: InterContinental, Kuala Lumpur
Conference Guide

Download Conference Guide

Treasury products offer end users a range of opportunities to hedge, speculate or manage risk exposure, and Shariah compliant equivalents are no different. The structure, use and application of Islamic treasury products are, however, governed by very important rules, conventions, documentation and agreements. With Shariah compliant treasury and hedging products becoming more widespread by financial institutions for both risk hedging and for structuring client investment solutions, these rules, conventions and agreements are crucial to the development of these products.

This one day, multi-speaker event will analyse and discuss the key legal, documentation and risk management issues of structuring and offering Islamic treasury products. Included will be a close examination of master agreements, netting arrangements, counter-party risk assessment and management, as well as an overview of dispute resolution issues for these sophisticated structures. The seminar will also offer a reminder of important Shariah and structuring issues relevant to Islamic treasury products.

KEY LEARNING OUTCOMES

  • Reminder of the key Islamic finance contracts and concepts that allow the development of Islamic treasury and hedging products
  • Application of the key international and local master agreements to the Malaysian environment: ISDA and IIFM
  • Assessing and managing counterparty credit risk exposure: market & regulatory developments
  • Key elements of conventional OTC derivatives agreements and the application to Islamic finance
  • Assessing dispute resolution mechanisms for Islamic treasury products in Malaysia
 

 

Agenda

   
9.15am – 10.45am Session 1: Assessing Key Legal and Documentation Issues for Islamic Treasury Products in Malaysia
  • Reminders on the legal and regulatory requirements that need to be considered when developing legal documents for Islamic Treasury products in Malaysia
  • Some of the practical issues and solutions in developing adequate legal documents for Islamic treasury products
  • Drafting key documentation in the development and marketing of Islamic treasury products in Malaysia
  • Hedging vs gambling and the position under Malaysian law
  • Application of the key international and local master agreements to the Malaysian environment: ISDA/IIFM and IDMA
Madzlan Hussain — Partner and Head, Islamic Financial Services Practice, Zaid Ibrahim & Co
10.45am - 11.15am Coffee
11.15am - 1.00pm Session 2: Islamic Treasury Product Documentation & Counterparty Credit Risk Exposure Market & Regulatory Developments
  • Overview of counterparty credit risk (CCR) exposure in bank Trading Books
    • CCR exposure measurement – mark-to-market (‘MtM’) plus potential future exposure (‘PFE’)
    • CCR exposure mitigation methods – payment & ‘close-out’ netting, collateral exchange and central clearing
    • Netting benefits for multiple transactions and concept of ‘netting set exposure’
    • Bankruptcy laws and netting – enforceability of close-out netting under Malaysian bankruptcy law
    • Collateral and how collateral can be linked to close-out netting exposure under derivatives master agreements to mitigate counterparty credit exposure and regulatory capital requirements
  • Key elements of conventional OTC derivatives agreements
    • Concepts and implementation of bi-lateral counterparty master agreements, representations, early termination and default conditions, payment and close-out netting methods, legal jurisdiction and enforceability opinions (ISDA 1992 and 2002 Master Agreements compared)
    • Documenting OTC transactions novated to central clearing counterparties (CCPs) under G20 requirements
Douglas Bongartz Renaud — Former Global Head of Currency Derivatives and Global Head of Rate Derivatives and Structured Products, ABN AMRO
1.00pm – 2.00pm Lunch
2.00pm – 3.30pm Session 3: Islamic Treasury Product Documentation & Counterparty Credit Risk Exposure Market & Regulatory Developments (continued)
  • Documenting Islamic Treasury and hedging products
    • Product range coverage issues – current status
    • Shariah compliance of underlying transactions
    • Shariah-compliant structuring of close-out netting clauses – example of applying Musawamah and Waad contracts within the IIFM / ISDA Tahawwut Master (Hedging) Agreement
    • Industry discussions concerning possible ways of applying Shariah principles to enable collateralisation mitigation of counterparty credit exposure in Islamic derivatives – challenges in structuring a Shariah compliant Credit Support Annex (‘CSA’)
    • Important issues in negotiating master agreements with different types of counterparties
  • Islamic Financial Services Act (IFSA) and differentiation between Islamic deposits and investment accounts
Douglas Bongartz Renaud — Former Global Head of Currency Derivatives and Global Head of Rate Derivatives and Structured Products, ABN AMRO
3.30pm – 4.00pm Coffee
4.00pm - 4.45pm Session 4: Accessing Dispute Resolution Mechanisms for Islamic Treasury products in Malaysia
  • Brief overview of dispute resolution options provided by SIDREC
  • Assessing the 'value-add' of Alternate Dispute Resolution to investors and market intermediaries
  • Highlighting practical examples of SIDREC's approach
  • Moving towards the future: going forward

Sujatha Sekhar Naik — Chief Executive Officer, Securities Industry Dispute Resolution Center

 

 

 

 


LEAD MEDIA PARTNER

Islamic Finance news