Breach of Wad and its compensation payment : a critical analysis of Islamic profit rate swap

A number of SharTah resolutions or standards on wad have been issued by the local and international Shan'ah bodies such as the International Islamic Fiqh Academy of the Organization of Islamic Cooperation (IFA-OIC), the Accounting and Auditing Organization for Islamic Financial Institutions (AA...

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Bibliographic Details
Published in:ISRA international journal of Islamic finance 2016-06, Vol.8 (1), p.191-195
Main Authors: Kasri, Nur Suhaydah, Zainalabiddin, Siti Syafira
Format: Article
Language:English
Subjects:
Agreements
Banking industry
Breach of contract
Commodities
Compensation
Default
Development banks
Exposure drafts
Financial institutions
Hedging
Islamic financing
Islamic law
Liquidated damages
Profits
Qualitative research
Research methodology
Third party
الأرباح
البيوع
التعويض
الفقه الإسلامي
المدفوعات
المفاوضات
المقايضة
الوعد
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Summary:A number of SharTah resolutions or standards on wad have been issued by the local and international Shan'ah bodies such as the International Islamic Fiqh Academy of the Organization of Islamic Cooperation (IFA-OIC), the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Shañ'ah Advisory Council of Bank Negara Malaysia (SAC-BNM) and others.V.CONCLUSION The research concludes that when there is a breach of wa'd under an IPRS arrangement, the IFI (who happens to be in-the-money) who suffered from such breach would impose the following charges on the promisor (the client): * payment for the price of the underlying commodity in case the promisee has already purchased the commodity at the time of the breach; * payment made by the promisee to a related third party where such payment obligation was created due to the 'back-to-back' hedging arrangement entered into by the promisee; * the cost of funds for the purpose of borrowing money to pay to the related third party under the 'back-to-back' hedging arrangement; and * penalty for breach of wa'd.[...]Edition.
ISSN:0128-1976
2289-4365