Islamic banks in Malaysia are inviting corporates, other financial institutions and statutory bodies to adopt the new Tahawwut Malaysian schedule for their Islamic derivatives and hedging transactions amid market volatility triggered by the pandemic. NESSREEN TAMANO has the details.
Developed by the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), the schedule is attached to the ISDA/IIFM Tahawwut Master Agreement, which was jointly issued by the International Swaps and Derivatives Association (ISDA) and the International Islamic Financial Market (IIFM) in 2010.
“The introduction of the Malaysian schedule is timely amid the rising global market uncertainty and demand for innovative Shariah compliant financial products,” said Norashikin Kassim, the chairperson of AIBIM’s treasury and markets committee.
Following the development of the schedule, AIBIM organized a refresher course led by experts from the ISDA, the IIFM and law firms Clifford Chance and Shearn Delamore & Co for its 26 member banks. The Malaysian schedule is expected to strengthen the local Islamic derivatives and hedging market, which, according to industry players, still needs mass and standardization even as its transactions have gained popularity over the last decade.
The agreement covers a range of products that include foreign exchange forwards, cross-currency swaps and interest-rate equivalents. The IIFM, which regularly assesses the standards within the documentation, said in 2020 that it is also looking at the possibility of developing an Islamic equivalent to conventional credit default swaps for risk mitigation.