CIBAFI says submitted comments on “Syndicated Financing” Exposure Draft

TDT | Manama                                                             

The Daily Tribune – www.newsofbahrain.com

The Exposure Draft of Governance Standard “Syndicated Financing” is now open for public consultation until the 21st of August 2022, for which the General Council for Islamic Banks and Financial Institutions submitted their recommendations.

CIBAFI said it provided collective feedback on the ED from its member institutions over 34 jurisdictions. An exposure draft is a document published to solicit public comment on a proposed new accounting standard. The Exposure Draft on “Syndicated Financing” was issued in February 2022 by the Accounting & Auditing Organisation for Islamic Financial Institutions. CIBAFI recommends defining the “facility agent” function separately in ED and its role, responsibilities, and relationships with other parties.

The role of “facility agent” is often played by the lead arranger of syndicated financing, “but many members are used to its being a separate function.” The recommendations also present the need for multiple Shariah supervisory boards (SSBs) to govern various aspects of the transactions in the syndicated financing. CIBAFI also calls for more flexibility for ED, especially in areas where it may be industry practice to “split certain documents or for matters in one document to be cross-referred to in another, rather than reproduced in their entirety.”

It also suggests ED give more coverage to situations in which the participants in Shariah-compliant syndicated financing transactions are not all Islamic financial institutions. “One possibility is that conventional financial institutions may participate in such financing. This possibility is explicitly recognised in AAOIFI SS 24. The ED generally does not provide sufficient guidance on how governance should apply in such a situation, though it does deal with hybrid financing.”