The Central Bank of Bahrain (CBB) recently organised a meeting of the International Islamic Financial Market (IIFM) Shariah advisory panel and selected IIFM member banks active in Islamic hedging/risk mitigation segment of the Islamic finance industry.

The purpose of the meeting was to have deliberation between Shariah scholars and market practitioners on Islamic hedging products which are essential for risk mitigation of real assets and real economic activity, said a CBB statement.

The meeting highlighted the significance of the Tahawwut Master Agreement (TMA) as a framework document where general terms and conditions are defined.

Most importantly, the close-out mechanism contained in the agreement was appreciated by the scholars and industry practitioners at the meeting.

The TMA has been developed based on documentation architecture which allows further standardization in the Islamic hedging segment, said a CBB statement.

Since standardization is a very comprehensive process and has to be carried out in different stages as required by the industry, the TMA is the first step of a much larger block which sets the stage for standardization of product schedules, templates and annexes as well as legal provisioning of close-out netting in various Islamic jurisdictions, it added.

The legal provisioning may also eventually allow the industry to address the Basel requirement of regulatory capital treatment for Islamic hedging transactions, the statement said.

'The TMA governs the most widely required Islamic hedging products and at the same time it provides basis for further standardization in the hedging segment which is one of the most critical and essential area for risk mitigation,' said Khalid Hamad, Executive Director-Banking Supervision at CBB and chairman of IIFM.

'We at CBB are pleased to host this prestigious meeting and are thankful to the scholars, the market practitioners and representatives from Association of Islamic Banks in Malaysia for their support in Islamic financial market unification,' he added.

Ijlal Alvi, CEO of IIFM said the key aim of the meeting was to obtain guidance from eminent scholars on acceptable Islamic hedging products and the industry’s standardization requirements for this important area of Islamic finance.

Several eminent scholars including Shaikh Dr Ali Muhyealdin A. Al Quradaghi, Shaikh Nizam Yaquby, Shaikh Esam Ishaq, Shaikh Dr Muhamad Akram Laldin, Shaikh Dr. Eltegani Abdelgadir and Shaikh Dr. Mohammed Burhan Arbouna took part.-TradeAraia News Service