Islamic Treasury Products

Islamic Treasury Products

Euromoney Training
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Description

This three day course will provide an overview of the structuring and execution of Islamic Treasury products, relevant for Islamic Financial Institutions, Corporates, and other service providers in the industry. Practical guidance will be provided on subject matter and issues such as: Underlying Shariah principles and background relevant to this sector Use of first principles in order to evaluate and structure the required solutions Impact on legal documentation required for transactions Analysis of Operational risk for each solution Analysis of the risk outcomes of each transaction, and relevant risk mitigation The execution process at the time of transaction and management during the life …

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This three day course will provide an overview of the structuring and execution of Islamic Treasury products, relevant for Islamic Financial Institutions, Corporates, and other service providers in the industry. Practical guidance will be provided on subject matter and issues such as: Underlying Shariah principles and background relevant to this sector Use of first principles in order to evaluate and structure the required solutions Impact on legal documentation required for transactions Analysis of Operational risk for each solution Analysis of the risk outcomes of each transaction, and relevant risk mitigation The execution process at the time of transaction and management during the life of the transaction Use of these products in the market, and alternatives available due to regional and Shariah scholar differences of opinion and preference Focus will not only be on the products, but also with regards to Legal Documentation and related aspects Operational impact of the transactions Related risks eg Tax, Shariah Risk, Moral Risk The course builds on the rationale and structures for the Islamic Treasury and then focuses on money market activities, foreign exchange transactions, profit rate transactions, and options and other relevant derivatives, such as swaps. It will broaden your awareness of the thought process, from first principles, to finding relevant solutions compliant with relevant Shariah guidelines. The course will allow you to understand key drivers and characteristics in Islamic Finance and how you can develop and implement treasury strategies to overcome challenges and generate returns whilst managing risk. This course has been designed for those directly structuring and executing these transactions, as well as those advising on them, and those working in departments and organisations that support and manage these transactions. Who should attend? Senior Managers in Financial Institutions from the following departments: - Treasury - Derivatives - Risk & Compliance Dealers, Sales/Trading in Islamic Treasury Departments Chief Financial Officers Corporate treasurers Shariah Advisors Corporate and Banking Lawyers Audit In house Legal Counsel Regulators Accountants
Day 1 Introduction of Key Concepts and Principles for an Islamic Treasury and Introduction to Islamic Money Markets Focus on relevant guidelines and restrictions in Shariah and application to Treasury - What is Riba and how is it relevant in this context? - Overview of relevant contracts, forms of investment, forms of transactions - Analysis of impact on Treasury - the introduction of asset based contracts and Riba restrictions - Analysis of the typical risks of these contract forms and the wider impact for a bank or corporate Introduction to Islamic Money Markets - The need for liquidity and cash management - Application of Murabaha from first principles - Documentation and risk outcome, and mitigation of these risks - The use of commodities and other assets in money market transactions - The roles played by Commodity brokers and suppliers - Wider uses and application of Murabaha and Commodity Murabaha to include financing products - Commodity Murabaha as a building block for other more complex products - The problem with VAT (sales duty on Commodity transactions) Documentation of transactions - The typical documentation used for Master Agreements and for execution of transactions - Analysis of the parties to the various agreements - Analysis of the variations that can occur in practice and the impact on documentation - Typical documentation and legal risks and how these are mitigated - Shariah compliance of documentation and execution Case study 1: Structuring and Executing Money Market transactions The roles of various parties Sample Money Market transactions will be “executed” by participants, ensuring correct and timely flow of confirmations and executions of all parts of the transaction - Diversity of practices and norms and cross-border complexity Day 2 Shariah Risk, Market Standardisation in Money Markets and Introduction to FX What is Shariah Risk in this context - Shariah Approval process, and what happens if this approval is reversed mid-transaction - How the Courts deal with Shariah compliant transactions: - intent of the counterparties against the separate elements of the transactions Standardisation of Documentation - The roles of ISDA/IIFM - Analysis of development of standardised documentation - Impact on the market and market participants - The difficulties with standardisation of Money Market transactions Islamic Money Markets continued - Wakala transactions, the rationale - Use of this structure in regional markets - the impact of Wakala transactions, the risks and mitigation - Documentation of Wakala transactions Shariah rules pertaining to FX transactions - FX Spot - FX Forward - FX Options FX Forwards - Deconstructing a traditional FX forward transaction into its constituent parts - Application of Commodity Murabaha in FX transactions - Application of Undertakings in FX Forwards - Shariah compliant replication of FX forward strategies and transactions - Market practices for FX forwards FX Options - Link to underlying Shariah compliant forms - Application of undertakings in the FX market - Analysis of possible application of Arboun structure to FX options and hedging Case study 2: Structuring and executing an FX strategy for a Bank, using structuring techniques covered so far. This will cover a typical commercial situation faced by a Treasury, with an analysis of potential solutions, and thereafter analysis of the potential contract forms and transactions to achieve the solutions. Day 3 FX Swaps, Profit Rate Swaps, Yield Enhancement and other market alternatives FX Swaps and Cross Currency Swaps - Deconstruction of traditional FX Swaps and Cross Currency Swaps - Using Commodity Murabaha in these hedging instruments - Analysis of risk outcomes, and mitigation of risks Profit Rate Swaps - Analysis of use of swaps in conventional markets - Application of Commodity Murabaha, Undertakings and other building blocks to hedge Profit Rate exposure - Achieving fixed Profit Rate and floating Profit Rate outcomes in financial terms - Achieving On and Off Balance Sheet solutions - Impact of On and Off Balance Sheet solutions for Profit Rate Swaps - Analysis of the major issues covering execution and management of Profit Rate Swaps Marking to Market: - the importance of this - and the difficulties of recognising future cash flows in a Shariah compliant framework - Analysis of work done by ISDA and IIFM, and Standardised Hedging Agreements Yield Enhancement Strategies eg Dual Currency Deposits and Capital Protected Deposits - When they may be suitable for a Treasury - Underlying Shariah principles - Constructing strategies using Undertakings and Murabaha and other contract forms Utilisation of Sukuk as liquidity instruments for Treasury - Availability of instruments - Secondary market - Can all Sukuk be traded? - Liquidity of secondary market - Shariah compliance and its impact on a Treasury Sukuk trading/liquidity book Case study 3: Structuring and executing a hedging strategy for FX and Profit Rate exposures for a Bank, using structuring techniques covered so far. This will cover a typical commercial situation faced by a Treasury, with an analysis of potential solutions, and thereafter analysis of the potential contract forms and transactions to achieve the solutions. Balance Sheet applications also to be considered in this Case Study Course summary and close
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