a.IBs must be able to identify its needs for Shari’ah-compliant collateral over different time horizons, and must address the Shari’ah, legal and operational constraints on the use of such collateral. The IB must actively manage its collateral positions while differentiating between encumbered and unencumbered assets, and its information system must be able to identify available unencumbered collateral by type, currency and location, in both normal and stressed times.
b.IBs must have a strategy, policies and procedures in place in order to ascertain its collateral needs over various time horizons in both normal and stressed times. The IB must also determine the Shari’ah, legal, regulatory and operational constraints on utilisation and transfer of collateral over different jurisdictions and currencies, and according to the nature of assets. The IB must also estimate the level of collateral according to its liquidity buffer requirements and in consideration of the various stages of liquidity crisis stated in its CFP. The IB must also explore the opportunity to expand the range of collateral it is holding, which can be diversified in terms of currency, jurisdiction, type and tenor.
c.An IB must actively manage its collateral positions while differentiating between encumbered and unencumbered assets. The IB must have a robust management information system that can meet the requirements and challenges of liquidity risk management and keep track of expected cash flows in light of contractual and behavioral profiles of assets, liabilities and off-balance sheet items.