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CIMB Islamic, Petronas Inks Tahawwut Master Agreement For Islamic Commodity Derivatives

KUALA LUMPUR: Today, CIMB Islamic Bank Bhd and Petroliam Nasional Bhd (Petronas) signed an inaugural Tahawwut Master Agreement (TMA) for shariah-compliant commodity derivatives.

The signing ceremony between CIMB Islamic Bank Bhd and Petroliam Nasional Bhd for the inaugural Tahawwut Master Agreement for shariah-compliant commodity derivatives. (From left): Petronas head of group commodities exposure management, treasury Nik Mohsain Harjuda Nik Ahmad, vice president, t treasury Freida Amat, CIMB Islamic chief executive officer Ahmad Shahriman Mohd Shariff and CIMB Group regional head, corporate and commercial sales and regional Islamic treasurer Ina Hasniza Ibrahim.

The signing of the TMA marks Petronas’ venture towards shariah-compliant derivatives, making the national oil company the first corporation in Malaysia to utilise CIMB Islamic’s shariah-compliant commodity hedging instruments for Islamic energy commodity derivative trades.

CIMB Islamic chief executive officer Ahmad Shahriman Mohd Shariff said the bank is proud to partner with Petronas for this landmark shariah-compliant commodity derivatives arrangement, contributing towards the development of Malaysia’s International Islamic Financial Centre (MIFC), in line with Bank Negara Malaysia’s Financial Sector Blueprint.

The TMA is a multiproduct framework agreement drafted by International Swaps Derivatives Association (ISDA) in collaboration with International Islamic Financial Market (IIFM) Association to govern shariah-compliant derivative transactions.

The TMA provides the market with globally accepted and standardised terms for Islamic hedging products, which will spur the growth of Islamic hedging products in the international market.

The agreement signing was formalised by Ahmad Shahriman and CIMB Group co-chief executive officer, group wholesale banking and group treasurer Chu Kok Wei, while Petronas was represented by vice president, treasury Freida Amat and head of group commodities exposure
management, treasury Nik Mohsain Harjuda Nik Ahmad.

Chu said the bank is pleased to support Petronas, an entity symbolic to Malaysia as the national oil and gas company, in meeting their ongoing business requirements.

“The partnership with Petronas under the TMA is timely, given the robust growth and increasing demand for shariah-compliant instruments in the market today.

“The TMA will certainly pave the way for Petronas to manage its future hedging transactions, and we continue to be on the lookout to foster more synergetic collaborations with other corporate clients in the future to continue to invigorate this attractive segment,” he said.

Freida said the TMA undertaking demonstrates Petronas’ support in advancing the development of shariah-compliant derivatives domestically and globally.

“Using derivatives under the TMA will enable Petronas to manage our exposures in a shariah-compliant manner.

“We remain supportive of the growth of the Islamic finance industry, and we believe that this partnership can advocate for more Islamic financial solutions in the future,” she said.

CIMB Group has been playing an active role in driving the growth of Islamic and sustainable finance.

The adoption of a globally acceptable master agreement bodes well with the development of Malaysia as an international marketplace for Islamic finance and is in line with the bank’s Forward23+ strategic plan.

Over the past three years, CIMB Group has executed several significant sustainable financing transactions, including its landmark sustainability-linked derivative (SLD) in October 2021, the world’s first ringgit-denominated SLD transaction.

In 2023, the CIMB Group tripled its sustainable finance target to RM100 billion by 2024 after meeting its initial target of RM30 billion two years ahead of schedule.

Petronas also invests in Islamic-related products and has issued sukuk and Islamic financing facilities.

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