9.1As part of the IBs’ overarching approval process, the following at a minimum must be undertaken by IBs:
a.New Product Approvals must include a risk assessment with a variety of scenarios, particularly with more pessimistic assumptions than the base-line case. The assessment should take into consideration the legal consequences of the underlying Shari’ah structure/contract throughout the life span of the products and services e.g. event of default, restructuring and rescheduling scenarios.
b.Mergers and acquisitions, disposal and other changes must include adequate due diligence that identifies post-transaction risks or activities conflicting with the IBs’ Governance Framework and other specifities relating to IBs. An IB must have a strategy towards alleviating over-dependence on few types of underlying structures/contracts that may present limitations in terms of tradability and flexibility in the events where risk emerges (e.g. dependence on monetization products).