Islamic Banking Sell and Buy Back Agreement

Topics: Islamic banking, Repurchase agreement, Contract Pages: 17 (2872 words) Published: July 3, 2012
PART A: 1. 2. 3. 4. 5.

OVERVIEW ......................................................................................................1

FOREWORD.............................................................................................................1 Purpose.....................................................................................................................1 Coverage ..................................................................................................................1 Definition ..................................................................................................................2 Interpretation...........................................................................................................3 POLICY REQUIREMENTS............................................................................5

PART B: 6. 7. 8. 9.

Mechanics on SBBA..............................................................................................5 Parties .......................................................................................................................7 Permitted Securities..............................................................................................7 Tenure .......................................................................................................................8

10. Minimum Value of Transaction...........................................................................8 11. Computation of Proceeds....................................................................................8 12. Settlement Procedures .........................................................................................9 13. Accounting Treatment ..........................................................................................9 14. Unexpected Holiday ..............................................................................................9 15. Pre mature of promise ..........................................................................................9 16. Event of Default or Non-Fulfilment of Promise .......................................... 10 17. Eligible Liabilities................................................................................................ 10 18. Liquefiable Asset Status under the Liquidity Framework........................ 11 19. Agreement............................................................................................................. 11 20. Other Related Matters ........................................................................................ 11 PART C: APPENDIX I...................................................................................................... 13 Islamic Securities Eligible for SBBA Transactions............................................. 13

BNM/RH/GL/007-7

Islamic Banking and Takaful Department

Guidance Notes on Sell and Buy Back Agreement

Page 1/13

PART A:

OVERVIEW

1.

FOREWORD

1.1

Sell and Buy Back Agreement (SBBA) is an Islamic financial instrument introduced for the purpose of enhancing liquidity in the Islamic Interbank Money Market (IIMM) and providing additional avenue for the IIMM participants to source their funding requirements. The rapid development of Islamic banking system has necessitated the need to create additional instruments for IIMM to address the impeding need and expanded requirement by the Islamic banking participants. One of the avenues to address the lack of instrument is through the introduction of SBBA.

1.2

The SBBA is akin to the repurchase (repo) agreement and has been modified to comply with Shariah principles. The National Shariah Council for Islamic Banking and Takaful of Bank Negara has approved the SBBA mechanism.

1.3

The issuance of the Guidance Notes is expected to assist the IIMM participants in the conduct of SBBA transactions with best practices. Should there be any need to obtain further...
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