The Asset’s Post

Transcript

Standard 59, when it was introduced, it was really challenging. And it continued to be challenging for some segments of the market and Malaysia was one of these markets because the requirements of having tangible assets. Was a bit of a challenge to qualify. There is other angles which I'm trying to simplify it. So standard 59 is among other things. If he is having tangibility, it's adding an additional credit risk layer. With this recook can be triggered IE you will request this book to be paid if you are not complying with the Sharia requirement. But it did not change the actual credit profile. Officer Cook from being a senior and secured IE. Yet that relies ultimately about the ability of the issuer, whether this government or a bank or a sovereign, to fulfill their debt to something else. So that was challenging the market. The big issuers of the markets, the sovereigns, the banks and the big corporation have passed that and went through the DD transition. If they chose to because not all markets chose to do that like they for example Saudi Arabia sovereign did not comply with Sharia IV 59 now standard 62 the one that is in draft format if it's really. Translated to what it is implying to, it's going to change the credit profile for for the instrument from being a senior secured to an asset backed securitization. That is by its nature is not something that you would say, OK, I'll just put the underlying asset and move that is an actual transformation of a debt class from one debt class to another. That could be easy to say if that debt class exists. In market where Cook is active, so the securitization and the asset backed bonds and I'm not talking so Cook is almost nonexistence of most of the markets of the OIC countries where you have that EU rely on the project or the assets to pay your debt rather than the issuer. So it doesn't exist. So that is a big challenge. Now the the the format is still in a draft format, just to put things in perspective. For me, I'm looking at it on three stages. Stage 1 is to see the final draft. How is that gonna look like? Is it gonna continue the same thing? Will it really be that? Secondly, who is going to implement it? Because Iofi is not implemented by default. It is implemented by choice, IE someone will say OK, I'm going to go and implement your fee. There is 20 jurisdictions that comply with the official RIAS tandards. So that's stage 2, but stage 3 is how are they going to implement it because these 20 jurisdictions cannot be vary significantly on the way that they implement Iofi 59 and the other standards. The Sharia standards is not implemented in the same way. So it's a three stage approach. We are monitoring it. We're seeing how is it going to impact. We rate currently around 190 billion of outstanding scoop which is a significant part of the market. It's more than 200 and. 12 or 15 instruments globally. So it's a significant part of the market. The vast majority of these with the exception of ILM is, is what we call asset based. I am is asset backed, but that is rare. So it's a transformation that I would say if you if what we saw in 59 was a challenge. This is a transformational shock, I would say. So we're watching that. We're seeing how it's gonna impact the market, who is it gonna impact, how long it's gonna last. But it's not the first time that the industry has seen turbulence. So that's a quick summary.