Bank Negara exposure draft on trade credit insurance, takaful

Although the transaction was concluded at RM703.44 per sq ft (psf), a source said the special-purpose vehicle (SPV) created by the MoF to undertake the transaction had initially wanted

KUALA LUMPUR: Bank Negara Malaysia has issued an exposure draft on its proposed requirements on the offering of trade credit insurance and trade credit takaful. 

In a statement posted on its website on Friday, it also proposes the recognition of trade credit insurance and trade credit takaful as credit risk mitigation under the Capital Adequacy Framework (Basel II – Risk-Weighted Assets) and Capital Adequacy Framework for Islamic Banks (Risk-Weighted Assets). 

“Collectively, these proposed requirements seek to position insurance and takaful products to better meet the protection needs of businesses,” it said. 

Bank Negara said trade credit insurance and trade credit takaful protect businesses against the risk of non-payment of goods and services by buyers. 

Such insurance and takaful can also help businesses manage country risk and thus opens up access to new markets. 

For financial institutions, trade credit insurance and trade credit takaful can also be used to manage risks of their trade financing portfolios. 

It said the policy document aims to clarify the approval process and other requirements for the offering of trade credit insurance and trade credit takaful by licensed insurers and takaful operators respectively. 

It also sets out the treatment of trade credit insurance and trade credit takaful as credit risk mitigation (CRM) under the Capital Adequacy Framework for banking institutions.