BMA sets up 2 new liquidity management contracts
The Bahrain Monetary Agency (BMA) has developed two new Islamic financial contracts. The contracts are aimed at enhancing the diversity of liquidity management products available to Islamic financial institutions, which manage assets estimated at over $230 billion.
A Shari'a-compliant sell and buy back product, developed in consultation with the Liquidity Management Center (LMC), will allow repurchase transactions of Islamic leasing bonds (Ijara sukuk) issued by the BMA, while a commodity investment agreement has been standardized to facilitate inter-bank dealings.
BMA is the first central bank to issue Islamic bonds. Under the Islamic repurchase agreement (Repo), financial institutions holding Ijara sukuk will be able to engage in contracts involving the simultaneous sale and future repurchase of the sukuk.
BMA will offer the Islamic Repo initially for a tenor of at least one month, although shorter maturities may become feasible in the future. The commodity investment agreement is aimed at facilitating inter-bank commodity-linked investment dealings. It follows a similar contract developed by the BMA to enable short-term commodity transactions between the Agency and Islamic financial institutions. — (menareport.com)
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