Bank Negara Malaysia (BNM) has released a draft of proposed regulations covering the trade credit insurance segment, as well as its Islamic counterpart.
The central bank has also proposed the classification 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), reported The Star.
“Collectively, these proposed requirements seek to position insurance and takaful products to better meet the protection needs of businesses,” BNM said in a statement issued on its website, adding that the draft regulations seek to clarify the approval process and requirements licensed firms must comply with before offering trade credit insurance or takaful.
According to BNM, trade credit insurance and takaful can help businesses manage country risk and allow them to access new markets with more confidence. Financial institutions can also use these insurance products to manage the risks of their trade financing portfolios.
Last year, BNM director of Islamic banking and takaful, Mohd Zabidi Md Nor, urged takaful operators to enter the trade credit segment once rules have been finalised due to its good growth prospects.
